Greetings and welcome to the Lattice Semiconductor Fourth Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rick Muscha, Vice President of Investor Relations. Thank you, you may begin. Thank you, operator, and good afternoon, everyone. With me today are Jim Anderson, Lattice's President and CEO, and Sherri Luther, Lattice's CFO. We'll provide a financial and business review of the fourth quarter of 2023 and the business outlook for the first quarter of 2024. 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. I would like to remind everyone that during our conference call today, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution you that such statements are predictions based on information that is currently available and that actual results may differ materially. We refer you to the documents that the company files with the SEC, including our 10-Ks, 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. This call includes and constitutes the company's official guidance for the first 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. We will refer primarily to non-GAAP financial measures during this call. By disclosing certain non-GAAP information, management intends to provide investors with additional information to permit further analysis of the company's performance and underlying trends. For historical periods, we've provided reconciliations of these non-GAAP financial measures to GAAP financial measures that can be found on the Investor Relations section of our website at latticesemi.com. Let me now turn the call over to Jim Anderson, our CEO. Thank you, Rick, and thank you, everyone, for joining us on our call today. 2023 was another strong year for Lattice as we expanded our product portfolio and delivered record financial results. Annual revenue grew by 12%, marking the third consecutive year of double-digit growth. Full-year non-GAAP gross margin increased 130 basis points to a record 70.4%, and we delivered 15% year-over-year growth in non-GAAP EPS. We also continued our rapid product portfolio expansion with the launch of multiple new hardware and software solutions, including two new device families based on our new Avant mid-range FPGA platform. While I'm pleased with the full-year revenue growth for 2023, our progress in Q4 of 2023 was impacted by the cyclic correction affecting the broader semiconductor industry. In the industrial and automotive market, although revenue grew 11% year-over-year in Q4, revenue declined 9% sequentially as demand softened across the end market as customers reduced their inventory levels. In the communications and computing market, revenue declined by 14% sequentially in Q4 as growth in data center computing was offset by weaker demand in wired and wireless telecommunications driven by lower wireless infrastructure deployments. Looking forward, we expect Q1 2024 revenue to be sequentially down from Q4 2023, driven by softer end-customer demand across our end markets as end customers rebound their inventory levels. At this point, we expect revenue in the second half of 2024 to be higher than the first half of 2024, driven by improving end-market conditions as end-customer inventory levels normalize, as well as new Lattice Nexus and Avant product ramps. Turning now to our product portfolio. In our small FPGA portfolio, we now have seven Nexus device families launched, with five in production and ramping with customers and two families entering production later this year. We are very pleased with the strong revenue growth of Nexus in 2023 as it was a major contributor to the overall company growth. We also achieved a record level of design wins with Nexus in 2023, and our Nexus pipeline of opportunities continues to grow. Nexus revenue and design win growth in 2023 was primarily due to a combination of displacing competitor devices as well as the adoption of Nexus in new greenfield applications. Turning to our mid-range FPGA portfolio. At the Lattice Developers Conference in December, we launched two new device families based on our new Avant platform. We now have three Avant device families in the hands of our customers, with the first device family, the Avant- E, generating initial revenue at the end of 2023 as planned. Avant initial revenue was driven by numerous applications such as communication gateways, industrial engine controls, LiDAR applications, and more. We expect the Avant- E series to ramp throughout the course of this year, with a more significant contribution in the second half of this year and continued growth in the following years. We expect initial revenue from the newly launched Avant- G and X series before the end of this year. Our three Avant device families provide a market-leading lineup of solutions for customers in the mid-range FPGA market. As a reminder, 90% of the target customers for Avant are already customers of Lattice today, and Avant leverages the same software that customers use today on Nexus. Given the competitive differentiation and ease of adoption of Avant, the overall pipeline of Avant design opportunities continues to grow and significantly exceeds the pipeline of Nexus at the same relative point of time. We also refreshed four of our key software solution stacks. We continue to see strong software adoption at an attach rate of over 50%. We continue to expand the capabilities and performance of our software portfolio to enhance the customer design experience and to make it easy for them to adopt Lattice products and get to market quickly. Our most widely adopted solution stack to date has been our sens AI stack, which supports a variety of AI applications. One of the frequent questions we've gotten from investors over the past months has been around the overall Lattice AI-related opportunity, so I'd like to provide some additional color on that topic. Lattice hardware and software solutions can be 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, for example, Lattice devices are used in the control, management, and security of the AI computing system. Another example is in AI-enabled PCs, where Lattice solutions are used to run the AI inference algorithm that provides features such as user presence and gaze detection in PC systems like the Lenovo ThinkPad. A third example is AI-enabled automotive ADAS systems, where Lattice solutions are used to aggregate and pre-process sensor data that are used for AI processing. We recently announced that Lattice solutions are being used in the ADAS systems of Mazda crossover SUVs. There are many other examples as well. When we look across all the AI applications across our end markets, we estimate that Lattice revenue in 2023 included about $100 million of AI-related revenue. We expect our AI-related revenue to more than double over the next few years based on the growing pipeline of AI-related design wins. In summary, I'm pleased with the strong progress in 2023 as we achieve record revenue and gross margin and continue to execute on the biggest product expansion in our company's history. While the industry moves through a temporary correction cycle and we experience some short-term cyclic headwinds in our end markets, we continue to be well-positioned for growth over the mid and long term. We have the strongest product portfolio in our history, and we continue to rapidly expand our product lines and accelerate our customer momentum. I'll now turn the call over to our CFO, Sherri Luther. Thank you, Jim. We are pleased with our full-year 2023 results. We drove double-digit revenue growth for the third consecutive year, continued gross margin expansion, and strong profitability. We generated a record level of cash from operations, expanded free cash flow margin, increased the cash return to shareholders through share buybacks, and completely paid down our outstanding debt balance. Let me now provide a summary of our results. Fourth quarter revenue was $170.6 million, down 11% sequentially from the third quarter and down 3% year-over-year as end-market demand softened and end customers reduced their inventory. Full-year 2023 revenue was $737.2 million, up 12% from 2022. Revenue growth for the full year 2023 was driven by double-digit revenue growth in our industrial and automotive end market, representing the fourth consecutive year of double-digit growth in this end market. Our Q4 non-GAAP gross margin declined 20 basis points to 70.4% compared to the prior quarter due to mix and was up 40 basis points compared to the year-ago quarter. Our non-GAAP gross margin for the full year 2023 was 70.4%, up 130 basis points from 2022. Q4 non-GAAP operating expenses were $55.5 million compared to $58.2 million in the prior quarter and $52.5 million in the year-ago quarter. The sequential decline in operating expenses was driven by the timing of certain R&D programs as well as the prudent and disciplined management of our SG&A expenses. Non-GAAP operating expenses for the full year 2023 increased to $225.7 million from $201 million, primarily driven by increased investment in our long-term product roadmap as well as in customer support. Our Q4 non-GAAP operating margin decreased 240 basis points to 37.8% compared to the prior quarter and was down 230 basis points compared to the year-ago quarter. Our non-GAAP operating margin for the full year 2023 was a record 39.8%, up 120 basis points from 2022. We continue to balance operating margin growth with a disciplined approach to investing in the long-term growth of the company. Q4 non-GAAP earnings per diluted share was $0.45 compared to $0.49 in the year-ago quarter. Non-GAAP diluted earnings per share for the full year 2023 was $2.01 compared to $1.75 for the full year 2022. This represents 15% year-over-year growth. I would now like to provide an update related to our taxes. In Q4, due to our consistent and continued profitability, we released our valuation allowance totaling $57 million, which had a GAAP EPS impact of $0.41. This is reflected as a tax benefit in our GAAP income statement. As a result of the release of the valuation allowance, we are expecting our 2024 effective tax rate to be in the range of the mid- to high single digits. Demonstrating our continued focus on cash flow, we generated a record $270 million in cash from operations in 2023. This represents an increase of 13% compared to the cash generated from operations in 2022. Free cash flow margin increased to a record 34% in 2023. In Q4, we repurchased approximately 900,000 shares or $50 million of stock, making Q4 our 13th consecutive quarter of executing share buybacks. Over that period, we have repurchased approximately 4.8 million shares, thereby reducing dilution by 3.4%. Our board recently approved a $250 million share authorization. We will prioritize investing in the organic growth of our business but intend to continue returning capital to our shareholders through share repurchases. Let me now review our outlook for the first quarter. Due to the cyclic correction and demand headwinds that we are seeing across all of our end markets, revenue for the first quarter of 2024 is expected to sequentially decline to between $130 million and $150 million. Gross margin is expected to be 69% ±1% on a non-GAAP basis due to lower absorption as well as a less favorable mix from our end markets. Total operating expenses for the first quarter are expected to be between $54 million and $56 million on a non-GAAP basis, which is roughly in line with Q4 2023 at the midpoint. We are taking a cautious and prudent approach to near-term OpEx while still enabling the long-term growth and expansion of our product portfolio. Overall, I'm very pleased with the continued financial progress we made in 2023 across many key metrics. As we enter 2024, we are experiencing near-term cyclic softness in our end markets, including customers rebalancing of their inventory levels. However, we continue to believe we are well-positioned for long-term growth. Operator, that concludes my formal comments. We can now open the call for questions. Thank you. We will now 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 that your line is in the question queue, and you may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Quinn Bolton with Needham. Please proceed with your question. Hi. Thanks for taking my question. I guess, Jim, as you look out at 2024, I'm sure visibility's pretty low, but two questions. You've guided to Q1 2024 midpoint for the March quarter. Do you have any sense, based on backlog, current order patterns, whether you would expect June to be sort of flattish, up or down? And then you expressed confidence that the revenue in the second half of the year would be better than the first half. What's that based on? Is that just your best guess as to when inventory is digested? Is it based on design win traction, the ramp of Avant? What gives you confidence in that second half being better than first half? Thank you. Yeah. Thanks, Quinn. So first of all, I think your first question was around Q2. At this point, relative to Q1, we would expect Q2 to be roughly in line with Q1. Now, historically, we've seen Q2 be stronger than Q1, so there's some potential that Q2 would come in a little higher than Q1. But at this point, we see it Q2 roughly in line with Q1. Some of the headwinds that we're seeing in Q1, we expect to continue into the second quarter as well. On the second half of the year, yeah, at this point, we do expect the second half to be stronger than the first half. That's really based on two things. The first one would be the inventory digestion and rebalancing that we're seeing by our end customers in kind of the first quarter of this year, which we expect to continue into the second quarter of this year. We expect that effect to kind of dissipate through the rest of the year and to be less of a factor in the second half of the year. So that's part of the second half being stronger. The other is, as you mentioned, it's essentially new product ramps. We've got a number of new products ramping throughout this year, and they contribute more to the second half than they do to the first half. A couple of examples of that is Nexus. We've launched seven device families based on Nexus. Five of those device families are already in production, but there's two more that go into production this year. One of those goes into production in Q2, and the other goes into production in Q3. And so we expect those to benefit us in terms of revenue in the second half. And then also Avant. We achieved first revenue from the Avant platform at the end of this past year. We expect Avant to ramp throughout this year and into next year. And the contribution from Avant is more significant in the second half than the first half. So yeah, it's a combination of the dissipation of the inventory effects at our end customer combined with new product ramps from Lattice. Perfect. And then just a follow-up question. You guys have kept the disty inventory levels pretty tight, so I imagine most of this inventory digestion you're seeing is coming from the end customers. But where are you with disty channel? Is that still pretty lean, and do you see an opportunity potentially to restock the distys in the second half? Are you going to keep that disty inventory pretty tight given the uncertain environment? Thank you. Yeah. Thanks, Quinn. Yeah, the end inventory digestion I was referring to is end customer inventory digestion and rebalancing. And so yeah, if we look at the amount of inventory held in the disty channel, if we're going to look at where it ended in 2023, I would characterize it as very much back to pre-pandemic levels, kind of back to normal pre-pandemic levels. And our goal would be to keep it at those normal pre-pandemic levels. Perfect. Thank you. Yep. Thank you. Our next question comes from the line of Hans Mosesman with Rosenblatt Securities. Please proceed with your question. Thanks. Hey, Jim, thanks for the color on the AI part of the business. I get that question asked a lot. Can you give us some puts and takes on how to look at this opportunity going forward? I suspect that the $100 million last year was driven by the accelerated server-type products, maybe ADAS. But what about the industrial markets as things go to more inference-related workloads there and so on? Yeah. Thanks, Hans. And actually, maybe before I talk about the go forward, maybe I'll just give a little bit more context and color around a little bit of the history of this as well. So Hans, you'll remember that back in our 2019 Investor Day, that was the first Investor Day that we did as new management team. Actually, AI workloads and the ability of Lattice to help with AI was one of the things we flagged back in 2019 as a potential growth area. And so even back then, about five years ago, we were making organic investments to enable customers to use Lattice devices in AI applications. In fact, one of the first solution stacks we developed was sensAI, which was around inference at the edge of the network, AI inferencing. And then we introduced another software solution stack called mVision, which was around computer vision processing. And all that was to help enable customers to design Lattice products into AI applications. We also made inorganic investments in this area as well. A little over two years ago, we acquired a small software company called Mirametrix, which was focused on computer vision, basically AI processing at the edge for computer vision technology. They came with an existing revenue stream. We've certainly been focused since we acquired them on growing the revenue synergy between the software that they brought as well as the Lattice devices. So there's been a number of investments we've been making over the past years. So yeah, when we look forward, we see a number of different applications where Lattice can continue to grow and participate. One is, as you mentioned, and I mentioned in my prepared remarks, in AI-optimized servers in the data center. We have a very good position in the control management and security of those types of servers. Generally, we have an equal to or higher level of dollars of content per server on an AI-optimized server than a traditional general-purpose server. Another application is in AI-enabled PCs where Lattice devices are already used today in doing AI tasks on PCs such as Lenovo ThinkPads. I also mentioned in the prepared remarks ADAS, but there's lots of different industrial applications, industrial robotics, industrial automation. In particular, computer vision processing and technology is really important in those types of applications. So that's a place where we see great synergy from the acquisition we made a couple of years ago on computer vision software technology used with Lattice devices to gain more Lattice position and growth in industrial applications. So it's really a number of different applications that we see. Yeah, and as I said in my prepared remarks, we expect the AI-related revenue across all of our applications to roughly double over the next few years. Frankly, when we look across all of our end markets, that is the fastest growing usage case or application model across all of our end markets is AI-related growth. Very helpful, Jim. Thanks a lot. Thanks, Hans. Our next question comes from the line of Matt Ramsey with TD Cowen. Please proceed with your question. Good afternoon, guys. Thank you very much for taking my question. I wanted to. It's really helpful that you gave us a little preview, Jim, of the June quarter just as you see it now as well. So if we're going to be around these revenue levels for a little bit as you ensure that the customer inventory levels get sold through and digested, I wonder if you could give us a little bit of an estimate as to, I mean, you guys, going back to the Analyst Day, talked about sort of mid to high teens growth for the company on a long-term basis, and the product roadmaps are all there to support that. I'm trying to get an understanding of what you guys feel like sell through is sort of a revenue level in the first quarter or in the second quarter that represent true end demand for the product. So at $140 million a quarter, any sense as to how much inventory you are actually burning through with the customers and sort of what a steady state end consumption for Lattice's business looks like at this point? Yeah. Thanks, Matt. It's a tough question to answer because while we have really good visibility on inventory that's in the channel with our distributors, we have over 10,000 end customers. And so we just don't have perfect visibility of the inventory levels across all of those customers. And so it's hard to judge that. But we believe at that $140 level that was the midpoint of our guide, we believe that's below the natural consumption and usage of our end customers. And the difference is the inventory that they're drawing down. And so we're not sure exactly how much that is, but we do believe we're shipping in below the natural consumption. And we believe that'll continue into Q2 as well. But that inventory effect that we're seeing that's dampening demand in the first half of the year, we believe that dissipates into the second half of the year, and we get back to more normal levels of consumption from our customers. Got it. That makes sense. Just a couple of quick things and follow-up, I guess, to that question. The first one is, if you look at the first quarter, if you kind of X out the under-shipment relative to inventory burn, do you feel like the end markets are back to some level of normal seasonality, or is sort of end consumption well below where you would think normal seasonal behaviors are for your business? And I guess the second follow-up is for Sherri. The disty percentage of revenue was a bit different than it's been in the past. Is this a strategic change, or is this just sort of how much inventory or how much sell-in happened direct versus disty was kind of dictated by who was burning through inventory at what rate? I'm just trying to think if there's anything strategic changing there as to your disty strategy or not. Thanks. Yeah. Matt, on the first part of your question on the Q4- Q1 decline that we're forecasting, yeah, definitely part of that is normal seasonality. Typically, Q1 is a seasonally lower quarter. But the forecast that we're giving for Q1 is beyond normal seasonality. And that beyond normal seasonality is really two factors. It's the inventory digestion and rebalancing that I was talking about, as well as our customers are seeing lower demand from their business as well. So they're seeing lower demand, and they're also drawing down inventory at the same time. So that Q1 is a combination of those three things: normal seasonality, lower customer demand, and then them drawing down their inventory levels as well. Yeah. Then, Matt, on the second part of your question in terms of the disty percentage versus a direct percentage of revenue, when you look at 2023, the full year 2023, and you compare that to 2022, it's very similar. So you don't see a whole lot of difference there for the full year versus the full year. On a quarterly basis, you can expect to see fluctuations in that percentage of revenue. But I really wouldn't read any more into that. It's just sort of typical in the range of what we have seen historically, even if you look back to 2022. Thanks to you both. Appreciate it. Thanks, Matt. Our next question comes from the line of Melissa Weathers with Deutsche Bank. Please proceed with your question. Hi, guys. Thanks for letting me ask a question. So for my first question, I wanted to touch base on your communications and compute segment, specifically on the compute side. I think we're hearing some mixed signals on overall demand for non-AI servers in 2024. Some people are talking about March being down seasonally. So I know you guys have higher content in the next-generation servers this year. So how should we think about the level of growth that we should be looking for in 2024? What would the second half look like in computing for you guys? Yeah. Thanks, Melissa. We don't really provide guidance at that level of granularity, but we did see but a little bit of additional color that might be helpful. We did see within communications and computing in Q4, although it was sequentially down, as I mentioned in the prepared remarks, we did see computing go up sequentially from Q3- Q4. It was communications that drove that overall segment down sequentially. And yeah, one of the benefits that we'll see in 2024 is that the new generation of servers that's ramping now, that we have a significantly higher level of dollars of content per server on that new generation than we did in the prior generation. That's about 50% more dollars of content per server. So even if the units remained exactly flat on a year-over-year basis, we would expect to still see growth in the data center server segment because of that higher level of content. So as that new generation of servers becomes a higher percentage of the overall server shipments throughout this year as it ramps, that's certainly a benefit to us throughout the year. Great. Thanks. I guess for my follow-up, I wanted to follow up on your Developers C onference that you had in December. Can you talk either anecdotally or qualitatively about that event and the kind of customer engagement that it brought on? What was the interest levels, and did it drive enthusiasm towards Avant? Just any takeaways from that event that you guys want to share? Thank you. Yeah. Thanks, Melissa. Actually, thanks for asking. We were really excited about the Developers C onference. That was actually Lattice's first Developers C onference we had ever done. And I was really pleased with the results. We had over 5,000 registrations. We had 35 different sessions. We had 40 different technology demonstrations. Those were not just Lattice demonstrations, but demonstrations from a lot of our partners. We had great keynotes from our customers and partners like BMW, Meta, and NVIDIA as well. Actually, the best part of the conference, from my perspective, was not just the partner and the customer activity that it generated, but we also launched the two newest device families based on our Avant platform for mid-range FPGAs. And that was the Avant-G and the Avant-X. We exited last year with three different Avant device families in the hands of customers, the E, the G, and the X, and generated initial revenue from Avant before the end of next or last year as well. What's really exciting about that is that's the beginning of the Avant revenue ramp. As you might recall, Avant doubles our addressable market. It creates an entirely new revenue stream for the company. It's additive to the existing revenue streams. It doesn't cannibalize the existing small FPGA revenue streams in any way. That was one of the best parts of the Developers C onference, is the launching of G and X versions of Avant, which we believe will start to generate revenue before the end of this year. There was certainly a lot of customer excitement and activity around that. But yeah, overall, we viewed the event as a tremendous success, and we expect to do another Developers Conference later this year. Great. Thank you. Our next question comes from the line of Tristan Gerra with Baird. Please proceed with your question. Hi. Good afternoon. Looking at your Gross Margin guidance, 69% is the first sequential decline since Q4 2019. Obviously, still very healthy level. What is driving the decline? Is it more mix-related? But it shouldn't be because Communications, as I will recall, tends to be lower margin or Industrial seems to be still fairly resilient. So is there some other component of mix that I'm not seeing that is impacting Gross Margin, and how much of this could be pricing-related? Yeah. Thanks, Justin, for the question. So from a gross margin perspective, a couple of things let me say first is that for 2023, our full-year gross margin at 70.4%, another record year for us. So we're really pleased with those results. Q4, that sequential decline, we mentioned that that was a little bit due to mix, the 20 basis point decline. And so then, more specifically to your question, the 69% at the midpoint, it's two things. It's mix. Majority of it is mix, and then the rest of it is a little bit from lower absorption. So when we talk about mix, industrial and automotive, that's typically our highest gross margin segment. And so when we see softness there, certainly, we see that impact in gross margin. But we're seeing it in terms of the softness, industrial and automotive, and communications, all of the softness in Q1 that Jim mentioned being offset a little bit by the compute side of things. So industrial and automotive would have the higher gross margin, and that's where you'd see the impact in mix coming down sequentially in Q1. The other thing, just to complete the thought on gross margin, is that when you look back, it's about going into our sixth year of our gross margin expansion strategy. So since that time, we've increased our gross margin by almost about 1,400 basis points. And so gross margin continues to be an area of focus for us, and we'll continue to focus on that to our long-term target model that we put out last year of the low 70s. Tristan, I think you also asked about pricing at the very end of your question. Maybe I'll take that piece of your question. I would describe our pricing as quite durable. As Sherri mentioned, we've had a gross margin improvement strategy in place since 2019. Part of that's been pricing optimization. Over those last five years of pricing optimization, through multiple different types of market conditions, our pricing has remained quite durable. In fact, our ASPs have continued to go up each year as we've introduced a wider range of products, and especially products with more capability, more capacity, more software content. As more of our product mix goes towards those higher capacity, high-capability devices, that has naturally pulled up our ASPs over time. We expect that trend to continue, especially when you think about now we're at the beginning of the Avant revenue ramp, and with Avant ASPs being 10x-20x higher than the Nexus and Pre-Nexus ASPs. As Avant mixes into the revenue base, we would expect ASPs to continue to grow over the coming years. Thanks. That's very useful. And then for my follow-up, I wanted to go back to the revenue breakdown. I would have expected the industrial revenue to roll over. It did a little bit, but still at a run rate that's well higher than a year ago. And it's communications that came down a lot. So the question is, is industrial the last leg to come down? And we haven't really seen that yet. And if you could remind us the percentage of communications as a percent of communications and computing. And then also in computing, you've showed some seasonality in Q1 of last year sequentially. So how much of computing is actually driven by data center densification, where more GPUs equate more root-of-trust security chips versus the weakness in server units, which also will have an impact? So if you could help us put all of this together, but also what should we expect with industrial? I know you gave us a hint for Q2 in the second half of this year, but wanted to understand better the moving pieces within the top line. Yeah. Thanks, Tristan. I think that was at least three different questions. So I'm going to do my best to answer those. So on the first one, on industrial and auto, yeah, we did see some sequential decline from Q3- Q4. I think it was about 9% sequential decline in industrial auto. We expect to see a deeper decline than that from Q4- Q1. And so yeah, and that has been later that decline has been later than what we originally saw in the communications and computing space. We started to see that decline really in the first half of last year. And industrial and automotive, we started to see those markets impacted really towards the end of Q3 of last year into Q4. And we expect industrial and automotive to be down from Q4- Q1. And so that's also part of why earlier Sherri said that's part of the mix change is if industrial and automotive, our highest margin segment, declines more than kind of the rest of the segments, it's a negative impact on our gross margins. Now, on the second part of your question on comms and compute, I think you're asking what portion is communications versus compute. We don't break those out separately, but just qualitatively, compute is the bigger component of that segment. Compute has grown significantly over the past years and is the bigger component. And then in terms of, I think the third part of your question was just a little bit more about computing, what we're seeing is there. What I would say is if you put units aside on an apples-to-apples basis on that new generation of servers, we have higher content. So we would expect to see growth based on the higher levels of content that we have on that new generation as that new generation becomes a greater percentage of the server shipments. But certainly, any changes in the end market overall server unit shipments, those would affect us as well. But we would benefit at the same time from that higher dollars of content per server. I hope that answered the third part of your question as well. Yeah. That's very useful. Thank you very much. Thanks, Tristan. Our next question comes from the line of Christopher Rolland with SIG. Please proceed with your question. Hey, guys. Thanks for the question. I'm a bit surprised, actually, that you guys didn't mention your win in a high-profile VR/AR headset. And I'd love to know, if possible, what the OEM might be using that for. They appear to be using an iCE40 versus a Nexus. Was this purely a price decision, or was there anything else that went into that? And is this a beachhead for headway into more of their products, or even outside of that OEM, do you guys get more excited about consumer again after this win? Thanks. Yeah. Thanks, Chris. That particular customer is a very long and very good customer of Lattice's, but that customer is also very sensitive about us discussing anything related to them. So I won't discuss that particular topic. Okay. Just how about consumer in general? Does this get you more excited about consumer? Yeah. In consumer, there are many different places where Lattice devices can be used, gosh, in all sorts of AI-enabled consumer devices, in all sorts of sensor-enabled devices, right? In the consumer segment, you're seeing more and more computer vision, sensory technology added to consumer devices, and obviously, more AI-related processing. And in all those types of applications, in all those applications, Lattice has a really great ability to play in those types of applications for a couple of reasons. First of all, our devices are incredibly power-efficient, right? And in almost all those devices, power efficiency is really important, whether they're battery-powered or whether they're connected to power. Power efficiency is important. Second is those devices get changed on a very frequent basis, right? They may get changed every year. They may get changed even more frequently than that with upgraded features, etc. FPGAs are a great solution for being able to change and add new features on a rapid basis. And then the third is that same software that we've been developing for other applications, that's definitely relevant in the consumer segment as well. It's the ability to use the, for instance, sensAI software stack to design Lattice devices into inference algorithms, the computer vision software stack, and a number of the other software stacks that we've developed. That helps those consumer customers get to market quickly and design Lattice solutions in. Now, all that said, we're always excited about that. We still believe that the big long-term growth areas for Lattice are the industrial and automotive segment and the communications and computing segment. But we do participate in the consumer segment where we believe we can bring some unique value to our customers. Great. And perhaps a second question. How do you think about your revenues versus Altera, Xilinx, Microsemi? Do you believe you can outgrow them, particularly because you have a new product rolling on? And about that new product, do you think that could be a 10% revenue add-er for you this year? And in terms of overall top line, is 15%-20%, which is your long-term growth target, still reasonable considering the setback? Thank you. Yeah. Thanks, Chris. So first of all, on Avant or in general across both small FPGA and mid-range, yeah, we believe we can continue to gain share in those markets. In small FPGA, we believe we've gained share over the past years. In mid-range FPGA, we're just at the very beginning of that revenue stream. But that is us penetrating into a segment that we haven't been in the past. It's completely additive revenue. We certainly believe that we can grow Avant revenue and gain share in that segment. Look, 90% of the target customers for Avant are already customers of Lattice today. The software that they would use to program an Avant device, they're already using that today on Nexus devices, for example. These are existing customers using software that they're already familiar with, just adding another product line from Lattice to their portfolio. So we certainly believe we can grow in the mid-range space. And then on the last part of your question around the long-term growth targets, yeah, we are still targeting and committed to those targets that we shared at the last investor day. Those are, we believe, the right long-term growth targets for the company. If you look over the last four years from 2019, which was our first full year as the new management team, to the end of last year, the average CAGR over that time period for the company was mid-teens. I think it's about 16% growth over that period. And that was growth only in the small FPGA segment of the market. And so I think we've demonstrated the ability to grow revenue consistently in the small FPGA part of the market. We still have headroom in terms of the size of that market and the total SAM of that market to continue to grow. So we believe over the long term, we can still continue to grow in that small FPGA portion of the market. And then in addition, adding on top of that now growth in mid-range where the revenue is completely additive and where we're doubling our addressable market. So we believe that helps us drive greater growth in the future. And so yeah, we'll certainly continue to target those investment or those goals that we put out at our last Investor Day. Will we ever get an update, like a number for Avant? And if so, when do you think we might get that number? Yeah. It's possible in the future. As Avant ramps to be a bigger portion of our revenue at some point, we would provide more color on that, right? Remember, we're at the very beginning of the Avant ramp. We had a little bit of Avant revenue before the end of last year. Now, that was on schedule. In fact, it was a little bit on the early end of what we had projected. But as Avant ramps through this year into next year and becomes a more significant portion, yeah, we may provide more color on the quantity of it at some point. Thanks, Jim. Thanks, Chris. Our next question comes from the line of Blake Friedman with Bank of America. Please proceed with your question. Hi. Thanks for taking my question. I wanted to circle back to Avant as well. I believe at your Analyst Day, you've mentioned that with an objective of Avant generating about 15%-20% of total company revenue in 3-4 years. I know you're not quantifying anything today, but I guess is that still the long-term objective to have Avant contribute that much to the model long term? Yeah. That's still our objective, Blake. Yes. Great. Thank you. And then maybe a little bit more near term, thank you for outlining some of the drivers for the second half of the year to drive a revenue pickup. I guess what gives you more of the confidence that given your customers are still working through inventory, that by toward the end of the June quarter, the inventory picture should be relatively clear and those second-half catalysts can help drive growth? Just any more details on there would be helpful. Yeah. That's based on, Blake, that's based on the customer forecasts that we have, the backlog that our customers have placed, for instance, for the second half of the year, and what customers have shared with us in terms of their own plans to draw down inventory levels and our own internal analysis. So based on that, as I said, we think that the inventory rebalancing and digestion is certainly in effect in the first half, but dissipates through the rest of this year. And that's one factor that leads us at this point to believe that the second half is stronger. But the other factor is all of those product ramps that we talked about earlier in the call. Now, look, business conditions can change. Macroeconomic conditions can change. That's what we're seeing at this point. That's what we expect at this point. And so we want to provide color, at least qualitative color, on how we see the year unfolding. But that's obviously subject to change if macroeconomic conditions or end-market business conditions change. Thank you. Our next question comes from the line of David Williams with Benchmark. Please proceed with your question. Hey. Good afternoon. Thanks for taking my question. First, I wanted to see if maybe there was anything geographically that you noticed this quarter in terms of demand weakness or softness among the different categories or segments, and maybe just kind of how you're feeling about that heading into the first quarter. Yeah. Thanks, David. So from a geo perspective, just kind of how some of the softness, the more recent softness that we've seen has evolved is especially in the industrial auto segment, which is the segment that slowed down most recently for us. The initial weakness that we saw towards the end of Q3 of last year, that was really primarily in Asia and in particular in China. In Q4 of last year, we saw that extend not just into Asia, but it extended to Europe as well. So we saw weakness in European industrials in Q4 as well as European communications customers. Now, North America, really the Americas, through the end of last year, held up, and we actually saw a sequential increase in Americas revenue from Q3- Q4. But going into the current quarter, Q1, we would expect Asia, Europe to be down again sequentially. We now expect Americas to be down as well as we're starting to see softer demand from some of our North America-based industrial and automotive customers as well. Okay. Fantastic. Thanks. And then maybe just on the automotive side, if we think about where your Avant platform can play, how do you think about that total addressable market in automotive specifically over the next few years? And maybe talk about any of the design win traction or early-stage design activity you're seeing around the auto for Avant. Thank you. Yeah. Thanks, David. So first of all, we believe that auto electronics represents a great growth area for the company over the long term. We believe we're underexposed to that area. That's one of the fastest areas of growth that we've seen over the past years for Lattice solutions, even ahead of Avant. And we believe Avant is really well-positioned in automotive electronics. We believe we'll see adoption of Avant in ADAS, infotainment systems, around a wide variety of applications. We'll be able to talk more about that as we move through the Avant ramp, but we certainly see many applications in the automotive electronic space. And I think we highlighted some of those potential usages at that most recent Developers Conference in December. So I would say stay tuned. Expect to hear more about Avant in the automotive segment. Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next question will come from the line of Srini Pajjuri with Raymond James. Please proceed with your question. Thank you. Hi, Jim. A couple of questions. First one on your disty inventory. I think you said it's back to pre-pandemic levels. Obviously, the SAM, I'm guessing, is bigger than pre-pandemic time periods. And then on top of that, you have many new products that are ramping. So I'm just curious as to when you think you'll start to kind of increase the disty inventory as we go through the next few quarters. Yeah. Thanks for the question. Just to clarify, when I say back to pre-pandemic levels, I mean on a relative basis, for instance, a weeks of inventory perspective. That accounts for the growth in the business that we've seen since pre-pandemic. Yeah, on a relative basis, it's back to the same levels as we were pre-pandemic. Our goal moving forward then is to keep inventory levels at our disties stable, right? Ultimately, what we're trying to do is if we've got a healthy level and a normal level of inventory at our distributors, what we're trying to do is match the sales into our distributors with the sales that our distributors are selling out to our end customers. That's our goal on a quarter-to-quarter basis. Got it. Got it. And then, Jim, on the Avant new product ramp, given the environment, on one hand, I think a lot of excitement about AI, etc. But on the other hand, the macro, especially in industrial, is not that great. So I'm just curious if that's having any impact, either positive or negative, on the design activity itself, given what's going on out there. Yeah. It's a good question. We really haven't seen it have an impact on the design win activity. Just a couple qualitative data points is last year, in totality, for the company, we had a record level of design wins last year and significant growth in our design win opportunity pipeline from 2022- 2023. That was across all products, Nexus, Pre-Nexus, and Avant. Now, I had actually, last year, given the team a pretty aggressive goal on Avant design wins, and the team actually exceeded their design win goal for last year on Avant, which I was quite pleased with. I want to take the opportunity to thank the Lattice teams for their great work on driving the Avant design win goals last year. And I would say overall, the other thing that we look at with Avant is just how is it tracking relative to Nexus at the same relative point in time? And if I look at the total Lattice or the total Avant design opportunity pipeline for Avant at the end of last year relative to the same or compared to the same relative point in time for Nexus, it significantly exceeds the Nexus opportunity pipeline, which, again, we just view as another really positive indicator of the future health of Avant. The main governor of the rate and pace of the growth of Avant in this ramping phase is really the customers' own timelines in terms of their ability, once we put the product in the hands of the customers, to design that into the system, to do their qualifications, to do their system-level software, and get to market. Clearly, we provide software to make that as easy as possible for our customers. Actually, the customer rate and pace is the primary gate to that Avant ramp. Got it. Thanks, Jim. Thank you. There are no further questions at this time. I'd like to turn the floor back over to CEO Jim Anderson for closing comments. Yeah. Thank you, operator. And thanks again for everyone for joining us on today's call. I'm very pleased with our strong results in 2023. And I actually want to take the opportunity to thank the Lattice team for the great execution in 2023. And as we look forward into 2024 and beyond, clearly, we're navigating some near-term macro headwinds, but we continue to be very well-positioned for long-term growth with the strongest product portfolio we've ever had in the company's history and a rapidly expanding product portfolio as well. Operator, that concludes today's call. Thank you. You may now disconnect your lines at this time. Thank you for your participation. Goodbye.