Lattice Semiconductor Corp Q1 FY2020 Earnings Call

Ladies and gentlemen, thank you for standing by. At this time, all participants are in a listen-only mode. And I'd like to welcome everyone to the Lattice Semiconductor First Quarter Fiscal Year 2020 Earnings Release Conference Call. A replay will be available approximately two hours after the call today. The replay dial-in number is (404) 537-3406. The conference ID number is 8369259. The replay will also be accessible on the Lattice website at latticesemi.com. I'd now like to turn the call over to Rick Muscha. Please go ahead.

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 will provide a financial and business review of the fourth quarter of 2020 and the business outlook for the second quarter of 2020. If you have not obtained a copy of our earnings press release, it can be found on our company website in the Investor Relations section at 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 actual results may differ materially. We refer you to the documents 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 second quarter of 2020. 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. Some financial information that we present during the call will be provided on both a GAAP and a non-GAAP basis. 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. Management uses non-GAAP measures to better assess operating performance and to establish operational goals. For historical periods, we provide 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 President and CEO.

Thank you, Rick, and thank you everyone for joining us on our call today. I'm pleased with the results we delivered in Q1 of 2020 given the dynamic environment around COVID-19. We took action quickly at Lattice to safeguard the health and well-being of our employees, which is a top priority. I want to take the opportunity to thank all of our employees for how well they managed this situation. I want to thank the engineering team for staying focused on executing our roadmap, our operations team for staying focused on supply chain management, and our business team for continuing to make progress with our customers. I could not be more proud of the Lattice team. Let me cover a few key points from the first quarter of 2020. Relative to our Q1 guidance, we experienced a roughly 3% impact to Q1 revenue due to COVID-19, with the impacted demand concentrated in Asia, primarily in our consumer segment. However, we saw strong year-over-year revenue growth in both our communications and computing segment, as well as our industrial and automotive segment. Also, we continue to make progress on gross margin expansion, with a non-GAAP gross margin increase of 120 basis points year-over-year as we continue to execute on our gross margin improvement strategy. We continue to drive improvements to profitability with a 39% year-over-year increase in our non-GAAP net income. We ended the quarter with a healthy balance sheet, including a strong cash position. Despite many of our employees working from home over the past weeks, we continue to make steady progress on our key product roadmap milestones and build customer momentum on the products that we launched last year. Let me now provide an overview of our business by end market. In the communications and computing market, revenue was approximately flat sequentially and up 8% on a year-over-year basis. In computing, our revenue grew sequentially and year-over-year, as we continue to see adoption of our products used in both servers and client computing platforms. Growth in servers was driven by both our higher attach rate and ASP versus the prior generation of servers. We continue to work closely with our key server customers to bring greater value to next-generation platforms. In the communications market, although revenue was down sequentially due to declines in older generation systems, we continue to benefit from 5G infrastructure deployments with both sequential and year-over-year growth in 5G revenue in Q1. We continue to expect the deployment of 5G infrastructure to be a long-term multi-year growth opportunity for Lattice. Turning now to the industrial and automotive market. Revenue increased 5% sequentially in Q1 and 14% on a year-over-year basis. Q1 growth in the industrial segment reflects increased demand for our products used in a broad range of applications, including factory automation, robotics, and embedded vision. Although automotive remains a small portion of this segment at this time, we believe that it will be a long-term growth factor as new customer programs ramp and demand in the automotive market returns. Turning now to the consumer market, revenue declined 24% sequentially in Q1 and 32% year-over-year. The decline reflects weakness due to COVID-19, particularly in the Asia geography, as well as the expected shift in the mix of revenue towards our other market segments over time. In consumer, we remain focused on applications with consistent multi-year revenue streams and higher margins where our solutions are enabling customers to differentiate their products. I'll now provide some highlights of our recent product roadmap execution. As we discussed at our Nexus platform launch in December, we're investing in a portfolio of higher-level software that allows your devices to be easily used, adopted quickly, and introduced to the market much faster. The first installment in our software solution portfolio was our award-winning sensAI software stack, which is focused on low-power imprints processing at the edge of the network. I'm very pleased that we launched our second installment in our software solution portfolio on time in Q1, which is our embedded vision stack called mVision. mVision is a complete hardware-software solution that enables customers to accelerate and simplify the implementation of embedded vision across our key markets. The response has been very positive from both our customers and the industry as our mVision solution stack recently received the Best in Show award at the 2020 Embedded World Exhibition. We also remain currently on track for the launch of the third installment in our software solutions portfolio, which is our security solution stack, which is planned for delivery to customers in the second half of 2020. With regard to our device roadmap, when we launched our Nexus FPGA platform this past December, we also launched our first device based on the platform, the CrossLink-NX device. At that time, we committed to releasing two additional Nexus-based devices in 2020. I'm pleased to report that execution remains on track for both programs. We expect to launch our second Nexus-based device in Q2, and our third device is on track to launch in the second half of 2020. The Nexus platform has been architected for power efficiency, which enables significant power reduction for our customers across a broad range of applications. We also offer significantly better performance compared to the competition in applications that require video connectivity, such as AI and embedded vision. We're very pleased with the broad adoption of our Nexus platform, as the number of both customer engagements and opportunities continues to build. In summary, while COVID-19 creates some uncertainty in the near-term business environment, we remain focused on our long-term strategy. We continue to accelerate the cadence of new products and solutions that we're bringing to market. We continue to build momentum with customers across our market segments with our expanding product portfolio. Our team remains focused on executing our strategy. I want to once again thank our employees for their creativity, dedication, and continued execution. I'll now turn the call over to our CFO, Sherri Luther.

Thank you, Jim. First quarter revenue was $97.3 million, down 2.9% sequentially from the fourth quarter and down about 1% year-over-year. The year-over-year decline was primarily in the consumer segment and was offset by strong growth in both our communications and computing segments, as well as in our industrial and automotive segment. Gross margin on a GAAP basis was 59.1% compared to 59.2% in the fourth quarter, up from 58.8% in the year-ago first quarter. Our non-GAAP gross margin expanded to 59.8% compared to 59.6% in the prior quarter, and was up from 58.6% in the year-ago first quarter. So 120 basis points of non-GAAP gross margin expansion year-over-year was driven primarily by execution on our pricing optimization strategy, as well as product cost reduction. Q1 GAAP operating expenses were $47.8 million, compared to $43.8 million in the fourth quarter, and $45.2 million in Q1 2019. On a non-GAAP basis, operating expenses were $36.1 million compared to $35.3 million in the fourth quarter, and $38 million in Q1 2019. In Q1, R&D increased sequentially to $19.1 million as we continue to invest in our product roadmap. SG&A declined sequentially to $17 million as we continue to drive SG&A spending closer to our target model. Q1 GAAP earnings per basic and diluted share was $0.06, compared to $0.10 in Q4 2019, and $0.06 per basic share and $0.05 per diluted share in Q1 2019. Q1 non-GAAP earnings per basic and diluted share was $0.15 compared to $0.17 in Q4 and $0.11 in the year-ago quarter. We continue to focus and execute on cash generation, with approximately $21 million in cash from operations in Q1. Given the current environment, we preemptively drew down $50 million on our revolver during the quarter to further solidify our cash position. Our leverage ratio, as defined in our credit agreement after the drawdown, is 1.7 compared to a leverage ratio of 2.4 in the year-ago quarter. Our ending cash balance was approximately $177 million. Let me now review our outlook for the second quarter. Revenue for the second quarter of 2020 is expected to be between $95 million and $105 million. Gross margin is expected to be 60% plus or minus 1% on a non-GAAP basis. Total operating expenses for the second quarter are expected to be between $36 million and $37 million on a non-GAAP basis. As we manage through COVID-19, we believe that our long-term growth drivers remain firmly intact. Our focus on execution, our differentiated and innovative product portfolio, and our solid balance sheet ensure that we are well positioned to capitalize on increasing customer and market opportunities.

We can now open the call for questions.

Thank you very much. Good afternoon. And considering all that's going on, congratulations on the results. Jim, I wanted to ask a couple of questions on the division of the revenue that you guys reported and are talking about going forward. Obviously, some pretty big moves in mobile and consumer down, and also the industrial and automotive business quite a bit higher than at least I had thought about coming into this call. So any insights into the supply chain that maybe artificially accelerated some sales in one division or restricted them in others and just maybe some commentary on how those two divisions play out in the second quarter would be helpful. Thanks.

Sure. Thanks, Matt. Yes, so if you look at Q1, we did see strong performance from our industrial and automotive segment; I think it was up 5% sequentially, 14% up year-over-year. I will point out that over the last couple of years, that segment has performed quite well for us, certainly relative to the broader market performance, and this is one of the segments that we expect to be a long-term growth driver for the company. There is, particularly in the industrial segment, a number of customer revenue streams and design wins that continue to ramp and perform well. So we're quite pleased with the progress in that segment. Again, we do view that as a long-term growth driver for the company. Now, moving forward into Q2, from Q1 to Q2 in the industrial and automotive segment, I would expect that segment to be kind of flat to slightly down sequentially. We would expect to start to see some COVID-19 demand-related impact to that segment in Q2. On the Consumer segment, in Q1, our Consumer segment was impacted by COVID-19 consumer demand that was primarily localized to the Asia geography, but pretty broad-based across our consumer customers in Asia. We certainly saw softer demand in Q1 and consumer than we had originally anticipated. I would expect that to continue into Q2. I would expect the consumer to again be sort of flat to slightly down into Q2. Our third segment, communications and computing, from a sequential standpoint, it was flat and up 8% year-over-year. Going into Q2, I would expect that segment to be sequentially up; we're seeing strong demand in that segment. With COVID-19, that has placed additional pressure on infrastructure. We're seeing higher demand from the computing segment, things like servers and client computing. We'd expect a bit higher demand from the communications segment as well.

Thanks, Jim. That's great. Sherri, a quick one for you, hopefully, but maybe it's just the mix of revenue by division or something about the way that you guys have managed working capital. But DSOs have gone up quite a bit over the last three or four quarters, and obviously, the results have been strong. So I don't want to nitpick, but if you can walk me through what's going on there and just how we expect that to – is that a new normal in terms of the way that you're going to manage the working capital, or is there something we should expect to change there going forward? Thank you.

Yes, thanks, Matt, for the question. I'm going to fill in for Sherri. I'm going to do my best since apparently her line dropped. But hopefully we'll get her back soon. So on DSO, yes, we did see an uptick in DSO in Q1. What’s happening there is it has to do with where the demand ends up being serviced within the quarter. If you look at Q1 demand, our February was quite weak. Our January was normal, February was quite weak versus historicals, and even March was off to a slow start. But demand started to pick up in March. What happened is more of our demand was loaded in the back of the last month of the quarter than what is typical in prior quarters. This effect drove up our DSO since the collections for those shipments in the last month of the quarter ended up being in the following quarter. We saw a little bit of that in Q4, as well, where demand was loaded a little further back in the quarter than prior. DSO is something we will work to get back down to more normal levels; we view the current level as elevated, and we will work to get DSO back to more normal levels. Sherri, are you back on?

Yes, sorry about that. I got dropped off.

Okay. I did my best to cover for you. So thanks, Matt.

Next question.

With the guidance in gross margin about 200 basis points away from your target, which is a longer-term target, which is a great achievement. Do you have more leverage in terms of gross margin expansion with existing product and mix to get to that longer-term target, or do you need the ramp of Nexus and the next generation platform to get there?

Yes, thanks, Tristan for the question. I think it's a combination of both. Certainly, as you're aware, in late 2018, we put in place a strategy to drive better pricing. We called it our pricing optimization strategy on existing products. We also put a strategy in place to drive multi-year product cost reductions, and both of those strategies we continue to execute on. We will continue to execute on that moving forward. There is still room for more improvement on pricing optimization, even on the products that are already in production. And there's more room for product cost improvements. In fact, we have a long-term roadmap to drive product cost improvements. So we expect to see gross margin expansion from products already in production. Also, as you mentioned, as we bring some of the new products online, for instance, the products based on our Nexus platform, we expect those new products to be accretive to the company's overall gross margin. We are very focused on our long-term goal, which is to get above 62% gross margin, and we've made steady progress towards that goal and expect to continue to make progress.

You've mentioned 5G infrastructure at a time when companies have been targeting the past few quarters to maintain revenue in that segment. What percentage is it roughly of your total top line right now? Is that low single-digit? And also, if you could remind us what Huawei was as a percent of revenue last quarter? And do you expect Huawei to grow in the coming quarter?

Yes, thanks, Tristan. Yes, in terms of overall revenue, we don't break out 5G specifically, but it's still a relatively small part of our overall revenue because we view it as a good long-term, multi-year growth driver. For instance, in Q1, we saw sequential growth in 5G wireless infrastructure-related revenue, we saw year-over-year growth in Q1, and we expect 5G infrastructure revenue to be a growth driver over a multi-year period, not just for Lattice, but for the industry overall. We're well positioned there, and based on our Investor Day, we shared that in 5G systems, we enjoy roughly 30% more dollar content in the 5G system than we did in similar 4G systems. As 5G ramps, we expect to see good growth from that revenue line. To your question on Huawei, in 2018, Huawei accounted for roughly single digits as overall revenue for Lattice revenue. We saw that revenue decline in 2019 and would expect Huawei revenue to decline again this year.

Yes, thanks for taking my question. I guess you answered my question. If you're sitting around a conference table six feet away, we are all calling in, so that one's out of the way.

Yes, we are adhering to social distancing; we are following. Sorry, go ahead.

Excellent, very good. So, Jim, I wonder if you can update us on channel inventory, distributor inventory. How are people acting during this pandemic versus normal? Is there any buffers or safety stock being created? Just any general comments there, and then I've got a follow-up?

Sure, thanks, Charlie. On Channel inventory, we have very good visibility on our distributor inventory. Where we ended Q1 was what I would call a very healthy level. If we look at just historically what is normal levels of inventory for our distributors, we ended right in the middle of the range of what we view as normal inventory. We view it as healthy from the standpoint of not being too much inventory but also healthy from the standpoint of being able to serve customer demand. Distributor inventory is in good shape. We have not to-date seen any signs of buffering or safety stock, but it's something that we're watching very closely, and we definitely keep a close eye on it. So hopefully that's the color you were looking for in channel inventory.

No, that's perfect. And then my follow-up, you mentioned client computing within computing was also a popular strength. Others are seeing that trend as well. Maybe if you could just update us, Jim, roughly where Lattice stands as far as client computing as a market and what are some of the opportunities that you see arising in terms of the designs that you could potentially pursue within that end market? Thanks.

Yes, thanks, Charlie. In client computing, in addition to computing in the server segment, that's been a nice growth area for us as well. In client computing, there are a couple areas that we see as good potential opportunities for us. Our products are used for artificial intelligence for inference at the edge of the network. Client devices, client computing devices are edge devices. We do see opportunity for our products to bring artificial intelligence capabilities to client devices. That's one potential area of growth. Similarly, we've talked about our MachXO3D product, which is our FPGA with special security processing. That is used for platform root of trust in server applications, while that same security concept could be applied to client computing devices and networking devices. We do see some opportunity for potential growth in providing security or platform root of trust-type security in client devices.

Just wanted to follow up on consumer, and I know it's hard to quantify. I certainly understand the Asian consumer dynamics there, but was part of the weakness you guys shying away from lower-margin business? If so, how do you kind of quantify that? And bigger picture, how much more pruning of lower-margin consumer do you guys have to go? What kind of a headwind do you think it might be for this year?

Yes, it’s a good question, Chris. In addition to clearly seeing an impact in Q1 due to COVID-19, we also had consumers normally down from Q4 to Q1. So we have both of those factors impacting our results. If you look over a multiyear period, we expect our revenue to shift over time for a greater percentage to come from our other market segments: industrial and automotive and communications and computing, with a smaller percentage over time coming from consumer. Within the consumer segment, we're transitioning the type of revenue and design wins that we are winning. We're focusing much more on prosumer applications, which are high-end consumer applications where our products can really help differentiate customer systems and have longer multiyear revenue streams with higher gross margins. We are executing that transition within consumer right now. Consumer is an important segment for us, but we're in the middle of that transition to longer revenue streams and higher margins.

Great. And on the industrial side of things, I appreciate that new industrial programs are ramping. But with industrial and auto, that segment for others, there seem to be some more structural worries with the virus here. Do you think these programs are going to be enough to give you a material difference versus your peers? Or is this more of a near-term phenomenon for you? Do you think you can grow through what could be a downturn here? Are there any supply chain issues buying ahead, for example, on supply chain worries, that are boosting that in the near term? Thank you.

Thanks, Chris. First of all, in the industrial and automotive segment, the majority of revenue within industrial and automotive is industrial. We expect automotive to be a longer-term growth opportunity. We have several employee design wins in the automotive segment that we expect to ramp over the course of time. Those design wins typically ramp slower in automotive. The industrial segment has performed quite strongly relative to market performance over the last couple of years, and we expect this segment to continue to be a long-term growth opportunity. Our products are well suited for several secular trends we're seeing in industrial that we believe will grow over a multiyear period, such as industrial automation, increased use of robotics, and touchless control where the operator doesn't have to touch the machine. We're seeing nice design win traction within this segment and expect it to be long-term growth. In the short term, we would expect some potential declines in Q2 due to COVID-19 impact on demand. But overall, we expect the industrial segment to be a growth area for us.

Hi everyone, congratulations on a great quarter and outlook in a tough environment. Just on the Nexus platform, I know it's very early with the launch starting back in December. But the time you talked about 65 customers, 35 early access, have you seen any of these early access customers push out interest or indicate any product delays at this point that are COVID-related? How do we think of that, even if revenue is not really expected till 2021?

Yes, I'd say, not just for our Nexus platform but other products we launched last year; we're seeing healthy levels of customer activity and intensity on our design wins. Today, we haven't seen any COVID-19 impact on customer programs. Our Lattice team—sales and application engineering—have done a great job supporting our customers despite COVID-19 and the work-from-home situation. We continue to see good engagement and positive progress. With Nexus, when we launched in December, we had 65 customers engaged, and that's now grown to over 100 customers engaged. We're seeing strong interest in the platform and good design funnel. The platform is competitive, being the only FPGA product on FD-SOI technology, which offers very good power efficiency. We're quite pleased with the progress made despite the challenges posed by COVID-19.

Great. And then just one more to that extent, you've always talked about broad customer adoption across markets for Nexus, including robotics, industrial automation, and communication. As the customer count has grown, in terms of initial interest, which end market could maybe lead the charge? Is anything standing out in particular?

No, we're seeing really good broad-based adoption across multiple markets that value proposition of 75% better power efficiency versus competitors is advantageous to customers across every market segment. Every customer is faced with power constraints, so that level of efficiency benefits systems across different applications. Typically, our consumer segment is the one that is fastest in terms of time to revenue. I would expect our first Nexus devices to enter production in consumer-related devices or devices in the computing segment first.

Great, that's very helpful. And then one last one if I may, I know you touched already on gross margin and sort of the three levers you have to pull. This quarter was quite impressive from a product gross margin growth perspective in the face of declining sequential licensing revenue. Obviously, some of that mix is from pricing optimization and product cost reduction. I'm just curious if you've uncovered additional levers to pull within pricing optimization and cost reductions. I think you've talked about nine initiatives in the past. Just curious if that number has sort of grown over time?

Absolutely, we continue to find areas to improve pricing and optimization. At the end of 2018, we put in place our initial strategy, and many of those initiatives are ongoing into 2020. We have added focus areas as well. We view pricing optimization as an ongoing process; there's always room for improvement. We're also focused on product cost reductions with a roadmap for that as well. We expect to execute on this in 2020 and beyond to help carry us to that goal of greater than 62% gross margin, which is our business model target. Additionally, new products, like those based on the Nexus platform, are expected to be accretive to our overall corporate gross margin and should help drive margin expansion as well.

Thanks, Jim and Sherri for taking my questions. Jim I guess the first one in the industrial and automotive segments. I'm curious how does that segment end up in terms of revenues versus your original expectations? You gave us some early February guidance. And could you also give us the relative trends between North America and rest of the world, specifically Asia?

Yes, first of all on the first part of your question relative to our original expectations, I would say it ended up being a little bit better than we had expected, pretty much in line with what we had expected, maybe slightly better. That helped to offset a little of the worse consumer results that we had expected. North America and Europe performed as we had expected; they were on target. It was really Asia that was weaker than we had expected, particularly in the consumer segment and mainly in China's geography.

That's helpful. And my follow-up question is in your comms and computing segment. I think you mentioned you expect that segment to grow sequentially in the second quarter. I'm curious if both the comms and computing parts are expected to grow and if you see the non-5G part continue to grow as well?

Yes, we expect overall growth in comms and computing; primarily being driven by compute. We're seeing COVID-19 placing pressure on infrastructure. We're seeing strong orders from our server customers in general, which should help drive sequential growth in that segment. We expect 5G revenue to continue to be strong into Q2. The non-5G revenue in our communications segments should be flattish sequentially, hopefully that gives you more color.

Hi, Jim, thanks for letting me ask a question. Congrats on executing so well in a challenging environment. I had a question on some earlier comments around China. I understand the Huawei dynamics, but I think there are some new rules the DIS is putting out there, which potentially remove some civilian exceptions. I'm wondering if you've had a chance to think about potential implications, because it seems like they've called out FPGAs and FPGA shipments among other tech into China and some other countries. Any thoughts on that would be helpful? Thanks.

Yes, thanks, Reuben. The announcement was made yesterday, and we've only had a day to assess its potential impact. Our initial read is that based on where our products are manufactured and the current export control classifications for our products, we don't believe there would be an impact to the products we're currently shipping. There is a 60-day feedback and comment period for the industry, so we don’t expect any impact on our Q2 business. Of course, that’s our early read; we'll continue to assess the situation as it evolves and maintain our compliance with export restrictions.

Yes, that's very helpful, Jim. I appreciate that. So we'll see how that plays out. Just a quick follow-up on the commentary around software. It's great that you guys are executing on the plan for products later this year. As you think about the success and initial feedback around sensAI, I wonder if you're planning additional software stacks beyond the two that you mentioned today on the call and are you getting customer feedback on these software stacks? I'm wondering if they're helping you define some of the IP that's going to be included and if that's helping point your direction into how you think about that part of the business and product categories as you think longer-term.

Yes, thanks, Ruben. We're seeing good customer activity on sensAI, the first installment in our software solution stack portfolio. We're seeing good traction across various markets. In February, we launched our second installment, the mVision embedded vision software stack, which received a positive reception and industry recognition. That's two software stacks, with the third planned for the second half of this year focusing on security for edge applications. We are contemplating additional software solutions beyond that and working closely with customers to understand what would be beneficial. This is a key part of our R&D strategy. I affirm our commitment to improving hardware and to enhance software solutions so customers can adopt devices quickly and bring them to market.

Your next question is from David Duley from Steelhead Securities. Your line is now open.

Yes, thanks for squeezing me in, I very much appreciate it. I had just a couple of follow-up questions to topics that have already been discussed. I guess first, you mentioned the COVID impact in the first quarter. What do you think the impact to revenue would be in the second quarter? As a follow-on to that, if you could just talk about what you're hearing from your customers for the second half of the year?

In Q2, our guidance factors in what we think is the impact to demand from COVID-19. If you look at the midpoint of our guidance, that's our best estimate based on data we have, including our billings and backlog, as well as forecasts for the remainder of the quarter from both our customers and distributors. That midpoint is our best estimate to-date, and we've widened the range for more variability due to COVID-19. In terms of the second half, it’s still difficult to gauge; customers are also finding it tough to estimate the impact of COVID-19. We're keeping close tabs on our customers and have visibility on the ramp in the back half of the year.

Okay. And as your business, do you see signs of recovery in your business in Asia or in China, specifically? Those would seem to be geographic regions that most likely saw demand impact first. I'm just wondering if they're starting to improve at this point.

Yes, we certainly saw in China, we had very slow demand through the end of February and into the beginning of March. That started to pick up significantly at the end of March, and we've seen strong demand in China continue into the beginning of this quarter. So yes, we saw a pickup in China demand, starting around mid-March.

Excellent. Final thing from me is, have you seen your – what currently are your lead times and have they extended because of any sort of supply issues via foundries and shipments or anything like that? Any information there you could share with us would be most helpful. Thank you.

Sure. We are working closely with our suppliers to meet customer demand. Currently, we are meeting demand and working closely with suppliers to keep it that way. We plan to build a bit of inventory on high-demand products from Q1 to Q2, ensuring we're prepared for any surge in demand. We're also making sure to order long lead time ingredients well in advance. We are watching lead times closely but have seen them extend a little on some products. We're committed to ensuring we can meet ongoing customer demand.

And there are no further questions at this time. I will turn the call over to Lattice CEO Jim Anderson for closing comments.

Thank you, Operator, and thanks everyone for joining us on the call today. I want to take the opportunity again to thank the Lattice team and our partners for all of their professionalism and dedication in the current environment. We really appreciate it. Despite some of the recent challenges, we continue to make steady progress and remain focused on executing our strategy. We appreciate your support and hope you and your families remain healthy.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.