Lattice Semiconductor Corp (LSCC) Q3 2022 Earnings Call Transcript

Greetings, and welcome to Lattice Semiconductor Third Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rick Muscha, Senior Director 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 will provide a financial and business review of the third quarter of 2022 and the business outlook for the fourth quarter of 2022. If you have not obtained a copy of our earnings press release that can be found at our company website in the Investor Relations section. I would like to remind everyone that during our conference call today, we may make projections or other forward-looking statements regarding future events or the future financial performance of the Company. We wish to caution you that such statements are predictions based on information that is currently available and the actual results may differ materially. 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 fourth quarter of 2022. 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 provided reconciliations of these non-GAAP financial measures to GAAP financial measures that can be found on the Investor Relations section of our website. Let me now turn the call over to Jim Anderson, our CEO.

Thank you, Rick, and thank you, everyone, for joining us on our call today. We delivered strong results in Q3 with record quarterly revenue, which grew 31% year-over-year and non-GAAP net income growth of 68% year-over-year. We're very pleased with the growth in our current product portfolio and we're excited about the launch of our newest FPGA platform, Lattice Avant, on December 5. Avant will double our addressable market and create new greenfield revenue opportunities for Lattice. Let me touch on a few Q3 highlights. In addition to the strong revenue growth, we expanded non-GAAP gross margin by 590 basis points year-over-year to a record 69.5%. We achieved record non-GAAP operating profit of 39.7%, which was an increase of 930 basis points year-over-year. And we continue to expand our roadmap with the introduction of an automotive version of our CertusPro-NX. Let me now provide an overview of our business by end market. In the communications and computing market, revenue was roughly flat sequentially and up 26% on a year-over-year basis. We remain on track to deliver our fourth consecutive year of double-digit growth for this segment. The three key long-term growth drivers in this segment continue to be content expansion in data center servers, new greenfield client computing design wins, and growth in 5G wireless infrastructure. Turning now to the industrial and automotive market. Revenue increased 15% sequentially and was up 45% on a year-over-year basis. We expect this to be our third consecutive year of double-digit revenue growth in this segment. We continue to see this market as a strong long-term growth opportunity for Lattice as we address growing applications in industrial automation and robotics as well as automotive, ADAS, and infotainment systems. Turning now to consumer. Revenue declined 11% sequentially and was down 13% year-over-year, reflecting macroeconomic softness in the consumer electronics end market. Given that consumer represents only 6% of our total revenue in Q3, the revenue decline in consumer was more than offset by growth in our other segments. I'll now provide some product roadmap highlights. I'm pleased that in our most recent quarter, we launched an automotive version of our CertusPro-NX family with market-leading power efficiency performance and small form factor. This new product based on our Nexus platform adds to our solutions that are optimized for the automotive market, which we continue to see as a long-term revenue driver for the Company. In addition to our leadership position with Nexus, we're looking forward to further expanding our product portfolio with the launch of our Lattice Avant platform. Avant will double our addressable market and will create new greenfield revenue opportunities for Lattice. We're excited to share more details at the upcoming Avant launch event. Turning now to our software strategy. We've been increasing investments in our software portfolio over the past few years. These investments are focused on making it easy for our customers to adopt Lattice products and get to market quickly. As we mentioned on our last earnings call, over half of our new silicon design wins are now enabled by at least one of our five software solution stacks. Avant will also leverage the same software that our customers are using today on our current products. In summary, while we recognize there are macroeconomic headwinds and we continue to watch demand signals very carefully, we're pleased with our continued progress and the growth of our existing product portfolio, including the continued ramp of our Nexus platform. In addition, we're excited about the launch of our new Avant platform and the continued expansion of our product portfolio. I'll now turn the call over to our CFO, Sherri Luther.

Thank you, Jim. We are pleased with our strong financial results in Q3 with record profitability driven by double-digit revenue growth and continued gross margin expansion. We remain focused on free cash flow, continue to invest in our product roadmap, and return capital to our shareholders through share buybacks. Let me now provide a summary of our results. Third quarter revenue was a record $172.5 million, up 7% sequentially from the second quarter and up 31% year-over-year. Revenue grew double digits year-over-year in our two strategic market segments of industrial and automotive and communications and computing more than offsetting macroeconomic weakness in consumer. Our non-GAAP gross margin increased 40 basis points to a record 69.5% in Q3 compared to the prior quarter and was up 590 basis points compared to the year-ago quarter. Both the sequential and year-over-year increases in gross margin continued to be driven by strong execution of our gross margin expansion strategy, which we started in early 2019. Non-GAAP operating expenses were $51.3 million compared to $49.9 million in the prior quarter and $43.8 million in the year-ago quarter. Both R&D and SG&A expenses increased sequentially as we continue to make investments in our product portfolio and demand creation. Our non-GAAP operating margin increased 160 basis points to a record 39.7% in Q3 compared to the prior quarter and was up 930 basis points compared to the year-ago quarter. We continue to balance operating margin expansion with investments that will drive the long-term growth of our business. Q3 non-GAAP earnings per diluted share was $0.48 compared to $0.28 in the year-ago quarter, which represents 71% year-over-year growth. We are pleased with the strong cash flow generation, which continues to be a priority for us. In Q3, we drove a 41% year-over-year increase in operating cash flow. We returned $40 million of capital to our shareholders, repurchasing approximately 685,000 shares making Q3 our eighth consecutive quarter of executing share buybacks. Additionally, in August, our Board of Directors expanded the share buyback program with a new $150 million authorization that goes through the end of 2023. Let me now review our outlook for the fourth quarter. Revenue for the fourth quarter of 2022 is expected to be between $170 million and $180 million. Gross margin is expected to be 69.5% plus or minus 1% on a non-GAAP basis. Total operating expenses for the fourth quarter are expected to be between $51 million and $53 million on a non-GAAP basis. In closing, we are pleased with our strong results and progress and remain focused on driving further revenue growth and profit expansion. Operator, we can now open the call for questions.

Thank you. At this time, we'll be conducting a question-and-answer session. Our first question comes from the line of Ruben Roy with Stifel. Please proceed with your question.

Jim and Sherri, congrats on another solid quarter. I wanted to start, Jim, and see if we could talk a little bit about the puts and takes around the two core segments, communications and then automotive and industrial. Just sort of any detail around the quarterly performance in Q3? And then how you're thinking about those two segments relative to the guidance for Q4.

Thank you for the question. I'm pleased with the progress in both segments for Q3. Starting with communications and computing, we achieved 26% year-over-year growth, maintaining our previous performance. There's strong progress in our three main growth areas: expanding content in servers, 5G wireless infrastructure, and growth in enterprise networking and client computing. Looking ahead to Q4, I anticipate that this segment will remain flat or show slight growth. In the industrial and automotive segment, we are particularly satisfied with the 15% sequential growth and 45% growth compared to last year. Key growth drivers include industrial automation and robotics, along with strong performance in the automotive sector. Our products are well-suited for this market, offering advantages in power efficiency, size, flexibility, and adaptability, leading to significant design wins and a robust pipeline. We expect this segment to also be flat or slightly up in Q4. Combining both segments, communications and computing, along with industrial and automotive, now accounts for approximately 90% of our revenue. We expect communications and computing to achieve our fourth consecutive year of double-digit revenue growth, while industrial and automotive will likely mark our third consecutive year of similar growth. We foresee these segments being significant long-term growth drivers for the company in the upcoming years.

Great. As a follow-up, I'm wondering if we can spend a few minutes on Nexus. We're three years into Nexus and gearing up for the Avant launch next month. You recently released the fifth family of Nexus earlier this year. Can you share some insights on customer feedback? One of the features you mentioned during the Nexus launch was that FD-SOI has several inherent advantages that excited your customers, such as low soft error rates and reduced power consumption. How do you feel about the Nexus launch after three years? Additionally, could you provide a preview of the greenfield revenue opportunities for Avant? Will the end markets be similar, or can you share any details on those opportunities?

Yes, thank you. I'm always glad to discuss our product portfolio expansion, and we are very pleased with its progress. Starting with Nexus, we are happy with the continued advancements. Customer feedback has been excellent, and our competitive position with Nexus is very strong. The power efficiency is up to four times better than our competitors, and we have a significant physical size advantage. We continue to see strong customer engagement and momentum. To date, we have launched five different device families based on Nexus, with four already in production and ramping up. The fifth family will go into production in the first half of next year. Each new family entering production contributes to revenue growth. We expect more devices on the Nexus roadmap as well. The combination of Nexus with our existing portfolio makes our product lineup the strongest in the company's history, as we approach our 40th anniversary next year. We're also very excited about Avant, which is set to launch this quarter. We have a public launch event scheduled for December 5, where we will share more details. Avant will double our addressable market and position the company within an adjacent segment of the FPGA market. This new product is completely additive to our current offerings, and as Avant enters production in the upcoming quarters, it will create a new revenue stream beyond our existing ones. Customer engagement for Avant has been excellent, and it was actually customer demand that encouraged us to invest in Avant a couple of years ago. We look forward to sharing more details at the December 5 launch event.

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

This one is for Sherri. Sherri, regarding gross margin, I guess there were some puts and takes in September, some beneficial stuff, including mix. And it looks like it's carried over into December. But I was wondering if maybe you could kind of double-click for us on gross margin, what we're seeing there and whether this is sustainable or even you think you can build into 2023.

Thank you, Chris. So, we're really pleased with our gross margin results for Q3, another record 69.5%, a 40 basis points improvement sequentially, 590 basis points improvement year-over-year. As I've mentioned in our prepared remarks, we've been executing on our gross margin expansion strategy since 2019. So, we're now in our fourth year. And as a result of that, over that period of time, we've driven 1,280 basis points of improvement in gross margin since we started this strategy. When you look back in terms of the elements or the drivers of that gross margin expansion, it's been multiple factors. Pricing optimization has been one. New products have added value to gross margin. Mix has also been a contributor as well as product cost efficiencies over time. So, we've been able to execute on the strategy. And as we've talked before, some of those initiatives have been effective in the near-term and some of that more longer-term. But it's really the way that we think about things in terms of how we do business. When you look at our guide, it's a range, right? 69.5%, plus or minus 1%, it's a range. And so, we continue to focus on gross margin expansion just the way that we do business.

Great. And maybe one for you, Jim. I guess as we think about supply overall, inventories, you built inventories into September. We've seen some weakness from some other guys out there in the market. I was wondering if this has freed up some supply for you and whether you want some extra supply on top of that inventory? Or if you could explain why you were building inventories as well? And then lastly, as there's a little bit of slack in the supply chain, are you seeing some of those pricing pressures? Or are you even seeing some opportunities for better pricing moving forward?

Yes. Thanks, Chris. So first of all, on supply, we are seeing supply improve across the supply chain in general and certainly our Lattice supply. That's actually something that we flagged on prior earnings calls that we did expect to see some incremental supply capacity in our supply chain in the second half of this year and actually going into next year as well. We have seen the realization of that additional supply here in the second half. And we do expect supply to continue to improve into next year as well. So, we view that as very positive. We did intentionally grow inventory from Q2 to Q3, and that was really to support new product ramps. So as we ramp, as we were mentioning, we were talking earlier about the Nexus product ramp. As we ramp Nexus and the multiple versions of that, but even as we ramp new design wins on pre-Nexus products as well, we want to make sure that we have the inventory in place to support those new products or new design win ramps. For us, our product life cycles are very long. And so, the risk of obsolescence around inventory is relatively low for us. It just makes sense to us to make sure we position the right level of inventory so we're well positioned for design win growth. I think the last part of your question was around pricing pressure. We've seen pretty good durability in our pricing. I think Sherri touched on pricing optimization as part of overall gross margin expansion. We put, as part of our gross margin expansion strategy that we started executing at the beginning of 2019. I know that may seem like a long time ago, but we had a pricing optimization strategy at the beginning of 2019 that we've continued to execute on now in our fourth year plus of executing on that. We've seen very good durability in our pricing and I would anticipate that continuing.

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

Yes. Happy Halloween. Jim, my first question is regarding the results. It wasn't surprising to see some weakness in the consumer sector, particularly in the part of the computing business related to PCs, which seemed weaker. However, we did see significant growth in the auto industrial segment. Did you increase supply to meet the higher demand in that auto industrial segment? I'm trying to ensure that we didn't bring in additional inventory there. It appears that the organic business trends are still quite strong, but there was a significant increase in that segment this quarter, and I wanted to check on the sustainability of that growth moving forward.

Yes. The demand we experienced was stronger than we expected, particularly in the industrial and automotive sectors. If you remember from our previous earnings calls, we discussed an increasing number of design wins transitioning from competitors to us over the last couple of years. Some of these design wins have grown faster than we anticipated, reflecting the strong demand in that area. Lattice products are well-suited for our customers in this market, which we view as a solid source of long-term growth for the company. Our customer relationships in this segment have strengthened over the past two to three years. Regarding the consumer sector, we did see some weakness in the last quarter and earlier in the second quarter as well, driven by broader macroeconomic issues in the consumer electronics industry. While this has been a challenging aspect of our business, we have seen good strength in the industrial and automotive segments.

I appreciate it. I wanted to follow up on a question I've been receiving since the results were released regarding sustainability. Your company has defied a significant trend, especially considering the challenges in various end markets with inflation and competitors expressing concerns about consumer weakness, which seems to extend to certain enterprise sectors and even raise some worries in industrial areas. There's a notable amount of apprehension out there, which is entirely understandable, yet your company's results are impressively strong. My main question revolves around your visibility in the order book. Have you noticed any shifts at the end of the order book, either up or down, and what are your thoughts on visibility moving forward, given the strong results amid a turbulent macro environment?

Thank you, Matt. To start, we are currently only providing guidance for the fourth quarter. If we consider the midpoint of our guidance, we anticipate slightly increased revenue sequentially. However, it's important to recognize that the company is not unaffected by the broader macroeconomic challenges or declines in demand that may be observed in the market. The consumer electronics sector has been particularly weak, and we are witnessing a softer environment in areas such as servers, especially within data centers and the enterprise segment. Nonetheless, we are entering new product cycles that are advantageous for the company. The ramp of our Nexus products, as well as our pre-Nexus products, is performing well. There are specific segments where we have secured design wins and demand, contributing to our success. For instance, in the server market, our growth in the past year has largely resulted from increased content per server rather than changes in the end market. This growth has been driven by higher attach rates, meaning that a greater number of our Lattice chips are being utilized in servers over time. Additionally, we have seen higher average selling prices as customers choose devices with enhanced software and hardware content. This combination has led to significant growth in the server sector over multiple years, and we continue to identify opportunities for further content expansion in this area. While we are aware of the macroeconomic pressures and understand that we are not immune to broader market trends, we are excited about certain growth areas specifically related to Lattice.

Our next question comes from the line of Alessandra Vecchi with William Blair. Please proceed with your question.

Congratulations on the remarkable results in this environment. Jim, if I can just follow up on one comment you made where you alluded to new design wins ramping on pre-Nexus products? I think some investors kind of forget that the pre-Nexus products are still strong and progressing there? Is it getting a second life from some of the software attach rates? Or is this really just that long-life product?

Thanks, Alex. That's a great question, and I really appreciate it. Yes, I'm always eager to discuss the pre-Nexus products as well because we have experienced strong growth in Nexus products. You're correct in your inquiry about the software; the software layers we've introduced have significantly helped revitalize some of our pre-Nexus products. Our software strategy, which we initiated seriously about four years ago, focused on investing in software to facilitate easier adoption of our products for customers and to help them enter the market quickly. Additionally, this software enables our devices to be utilized in new applications that weren't previously considered. This applies not only to our new Nexus products but also to our pre-Nexus products. Therefore, I do believe that the software we've developed over the years has indeed helped rejuvenate some of those products. For instance, we've invested in application software solution stacks, and we now have five different solution stacks available in the market. I think these solution stacks have certainly contributed to prolonging the life and enhancing the design win pipeline for some of those pre-Nexus products.

Awesome. That's really helpful. And then just an extension of that question as well as Matt's. Some competitors or not competitors, but some other semi companies in the last, we have definitely pointed to weakening industrial granted the industrial portion that's closer to consumer whereas things like factory automation and robotics and vision still sound quite strong. Can you kind of split for us or at least give some color on how much of the business? Or how much of industrial you think tends more towards that consumer-centric side versus how we normally think about Lattice being leveraged to the value-add portion of industrial?

Yes. Thanks, Alex. It's certainly our industrial revenue base is certainly much more weighted towards what I would call deep industrial, right, industrial robotics, automation and definitely less weighted towards the more consumer-centric industrial. Again, we, as a company, we're certainly not immune to any general broad market trends. But as we talked about, I think, well over a year ago, we did say that we were starting to see a real strengthening and growth in our design wins in industrial and automotive over the last couple of years. Part of that, to your prior question, I think part of that was related to new software that we were bringing that was making it easier for our customers to design our products and to switch to our devices more quickly, to design out a competitor in favor of our devices. We have accumulated those design wins over the past years, now you're starting to see those trends transferring into revenue growth. And we're quite pleased with that. We do continue to see industrial and automotive as a long-term growth area for the Company.

Our next question comes from the line of Tristan Gerra with Robert W. Baird. Please proceed with your question.

Just as a follow-up to a prior question, any sense or qualitative commentary you could give us in terms of the mix of Nexus as a percent of your total revenue, are we kind of in the halfway there? Or is it still early innings? Any commentary there?

Thank you, Tristan. To provide some context on our progress, I would describe our current stage as still relatively early. This is primarily because we are only in our second full year of producing Nexus-based devices. We are still introducing new Nexus devices that have not yet started production. As I mentioned earlier, we have launched five device families, four of which are currently in production and ramping up. The fifth device sample that we introduced earlier this year will begin production in the first half of next year. We are actively developing multiple Nexus devices that are set to enter production. You can expect to see more Nexus devices based on our roadmap launched in future quarters. We anticipate that Nexus will continue to ramp up and eventually represent a larger portion of our revenue over the next few years.

Great. And then into next year, if you could talk about what percentage of your orders are non-cancelable right now? And would you expect that trend to continue in '23? I mean obviously, a lot of your end markets right now are still very, very resilient relative to peers, but just wanted to get some color as to how you're positioning your product in terms of customers thinking of in some weak areas doing push-outs and how is the cancelable pauses?

Yes. There hasn't been any change in our policies regarding cancellations or rescheduling. Regarding non-cancelable, non-reschedulable (NCNR) orders, we only employ that in specific situations. There must be a valid reason for requesting an NCNR from a customer; it’s not a standard practice for us. We want to avoid compelling customers to accept products or quantities they don’t need, as that would only postpone the problem. We typically use NCNR when a customer places an unusually large order for a part that has low volume for us and doesn’t have many other customers using that part. In such cases, we would request an NCNR order if the volume significantly exceeds what we usually see. This is applied in particular situations. As for our backlog in the current quarter, Q4, it remains at a healthy level, and we haven't experienced any unusual cancellations or reschedulings regarding that backlog. Overall, we are in a strong position for this quarter.

Our next question comes from the line of Mark Lipacis with Jefferies. Please proceed with your question.

I have two questions. First, can you tell us how you expect Avant to ramp compared to Nexus? Do you anticipate it will ramp faster or slower? Are there any unique factors with either that could affect this? Additionally, could you discuss how you expect production revenues to ramp? It's interesting to note that Nexus was launched in late 2019 and now, three years later, we're looking at Avant's launch in late 2022. A comparison of the two would be valuable. Also, I didn't catch your response to the earlier question about Nexus. Can you provide insight on how significant Nexus is as a percentage of your revenues? Are we looking at single digits or in the teens? Any detail you can share would help us benchmark Avant.

Thank you, Mark. Regarding your question about Avant's ramp expectations, we are modeling it similarly to Nexus. When we launched Nexus and introduced the first device, we saw revenue begin 12 to 18 months later. We anticipate that Avant will follow this same timeline for initial revenue. With the launch this quarter, we expect Avant's revenue to start in 12 to 18 months, including a small amount at the end of 2023, with a more significant contribution expected in 2024 and beyond. Importantly, the software used by Avant is essentially the same as what our customers already utilize from Nexus and pre-Nexus devices, which is advantageous for our customers. Additionally, over 90% of Avant's target customers are already existing Lattice customers, meaning we are expanding our product line with our current client base. These factors give us confidence in Avant's revenue growth, and we are using Nexus as our model for this.

Fair enough. And then for Sherri, the inventories did grow. Is this a new level that we should consider for inventories? Do you want to maintain a higher level of inventories on the balance sheet compared to the past?

Yes. Thanks, Mark, for the question. So we feel good about the level of inventory that we have right now. It's really to support our growing business. I think Jim talked a little bit earlier about the increase in inventory to support the growth of our business, whether it be in design wins for our customers as well as product ramps. We talked about the Nexus' four devices that are ramping currently. So that's very important to make sure that we've got inventory to support those ramps. Other inventory levels can fluctuate depending on what's happening in the business. So that can always happen. But the other thing to note about our products that's really cool is that our products have very long life cycles. The risk of obsolescence is really low. We feel like the inventory that we have is certainly not perishable and has a very long life. The other thing is that I'll just highlight is that our cash generation for the quarter was 41% year-over-year. So, very strong cash generation. Our free cash flow is 35%. Our cash generation as a percentage of revenue for the quarter alone was about 40%. Really, really strong cash results there. That's something that we'll continue to focus on as we manage the business.

Thank you. At this time, we're going to open the line for more questions. Our next question comes from the line of Hans Mosesmann with Rosenblatt Securities. Please proceed with your question.

Congratulations, guys. Great execution. Still on that inventory question. What are the expectations for inventories in the channel? Are you seeing any evidence of customers bringing down some inventories? And could that be impacting your business to some degree and maybe offsetting a little bit of the momentum from the new designs?

Yes. Thanks, Hans. So in terms of channel inventory, we have very good visibility on the inventory that sits with our distributors. Most of our revenue ships through distribution. We have good visibility there. If you look at where we ended Q3 on distributor inventory relative to historic normals, it's really quite on the lean side. We will need to replenish distributed inventory over the coming quarters as it makes sense because it is on the lean side. In terms of end customer inventory, we do have over 9,000 customers, difficult to have perfect visibility on end customer inventory. We do know with our strategic customers, we work closely with them to make sure they're getting the right supply from us without either building unnecessary inventory or being unnecessary lean in inventory. So we work closely with the strategic customers, and we have relatively good visibility there. But again, in distribution, I would say we're on the lean side.

Okay. That's helpful. And then one more question. Based on the designs that you guys are working on, do you envision platforms using pre-Nexus and Nexus and Avant on the same platform, on the same board?

That's possible, Hans. But I think more likely is the usage model, like, let's say, that we have a particular customer that's got many different types of systems. Maybe today, they use Nexus or pre-Nexus devices on, say, a portion of their systems, let's say, 1/3 of their systems. What Avant would allow us to do is address a higher percentage of their systems and their applications. It will allow us to move on to new systems that or applications in new systems that we haven't been able to service in the past. Think about it more as an expansion in share of wallet or product coverage at the accounts.

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

Thank you for the opportunity to ask a question, and congratulations on the strong execution. Sherri, I’d like to start by discussing the gross margins. As we look ahead to the launch of Avant, should we anticipate some initial pressure during the ramp-up that eventually improves over time? Or is there enough growth that could counterbalance any early ramp and potential yield issues?

Thank you, David, for your question. All of our new products, including Avant, are designed to enhance gross margins. This is a key aspect of our strategy for gross margin expansion, where new products contribute added value. That's the perspective to consider.

David, I think we shared in the past, too, that just a little bit more color is on ASPs. That Avant ASPs relative to today's product portfolio, we expect the Avant ASPs to be 10x to 20x higher than today's ASPs.

Great. And Jim, I guess, now we've got auto and industrial, about 50% of revenue. How do you think that mix will look trend over time? Is there an ideal mix that you think maybe gives you the best of all worlds? Or would you think that auto and industrial remains kind of this half of the revenue over time?

Yes. If I take you back to 2019, the first Investor Day that Sherri and I did. What we said in 2019 is we should really expect industrial and automotive, and comms and computing to be the growth engines of the Company. We reiterated that two years later in 2021 and that's kind of exactly what you've seen over the last four years. Both of those two segments growing very well, maybe in one particular year, one segment may grow a little faster than the other segment, but overall, quite pleased with the growth of those segments. They now account for about 90% of our revenues. So we're pleased with that mix. We believe those four markets and those two segments all have long-term secular growth trends underneath those markets. We also believe that Lattice is particularly well positioned to continue to grow our content and revenue in those markets, especially not just for the existing products but with the addition of Avant as we launch that this quarter and expand that product line in the coming quarters.

Our next question comes from the line of Richard Shannon with Craig-Hallum. Please proceed with your question.

I guess my first one kind of revisiting the topic of software and the benefit it's given you. Maybe if you can quantify or characterize the revenue benefit here or pricing dynamics that you think about it per application and to the degree to which it's beneficial to Nexus versus pre-Nexus? And also by end market, any characterization would be great, please?

Yes. Thanks, Richard. First of all, in terms of revenue or pricing benefit, when we look at, say, the last 12 months of design wins, these are silicon design wins. One of the things that we track is what is the software attached. When we win a silicon design win with our customers, what software are they using along with that piece of silicon as we sell that as an overall solution? What we've seen is that over 50% of our design wins now have a software attached, meaning the customer is using one of the five software solution stacks that we've brought to market. We view that as very positive because that helps them get to market quicker and helps us bring more value to our customers, and we believe that helps make our solution much more sticky over time. We can measure the ASP or the price that design win has won at. What we've seen from that data is that the design wins that include a software attach generally have a higher ASP than the design wins that don't have software attach. We know that our customer is valuing that software because we can measure it with the higher price that we get when we have a software attach. In terms of where we're seeing the attach on software, we're seeing it in both pre-Nexus and Nexus devices. I don't think there's a dramatic difference between the attach that we're seeing in either pre-Nexus or Nexus. Across the markets, we're certainly seeing really good software attach in things like computing in industrial automation, robotics, automotive electronics. I would say it's across quite a number of our markets. It depends on the particular software stack, one of the five software stacks, some are more targeted to particular markets, for instance, one of the software stacks is specifically for industrial automation. Another software stack is specifically around computer vision, which would be more applicable in a computing context or an industrial context. So it can depend on the particular stack. But I would say we're seeing good adoption across the markets.

Great feedback, Jim. I have a second question, but I’m experiencing some Halloween-related interruptions here. If you could remove me from the queue, I’ll rejoin later. Sorry about that.

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

Just really quickly on the compute side of things. Are you guys going to benefit from Sapphire Rapids and/or Genoa on the server side? And then on the client side, are you continuing to see a ramp in that Mirametrix portfolio that you guys have as well?

Yes. Thanks, Chris. On the first part, yes, we are expecting dollars of content per server or the amount of value that we're bringing per server to continue to expand on those platforms you listed. We are anticipating a higher level of content on those platforms, and we expect those to be beneficial to us. Again, just reiterating my point from earlier in the call that it's really content expansion that's been the primary driver of our growth in the server segment over the past years, and we do anticipate additional growth in the future. On the client in Mirametrix, we certainly are focused on continuing to expand the footprint of Mirametrix across client computing. We also believe there is opportunity to bring that same technology to other markets as well, for instance, in the industrial and automotive space. That is something that we're working on in parallel is not just expanding the footprint in client but finding new applications for the software in industrial and automotive as well.

Our next question is a follow-up question from the line of Richard Shannon with Craig-Hallum. Please proceed with your question.

All right. Sorry about that, guys. Nine-year-olds, they really get excited about Halloween. So I hope this won't happen again. My follow-on question is in an earlier response to a question. I think you talked to Jim about share gains, and I'm forgetting the context of it, but I think it was maybe in reference to a newer Nexus platforms. The reason for the outsized industrial growth here recently. Maybe if you can add some color to that to the degree to which that is related to newer Nexus products and gaining share against competitors who don't seem to be as focused in your focus areas? That would be great, please.

Yes. Thanks, Richard. Certainly understand the Halloween excitement, on my house, too. What I would say is that going back to the comments around industrial is, we've seen a very good growth in that design win pipeline. I think this would apply to automotive electronics as well. We've seen a nice design win growth over the past couple of years. That is in certainly our Nexus products, but also our pre-Nexus products. I think Alex asked a question earlier in the call around software and the ability of software to rejuvenate older products. The software that we brought to market has helped drive some of the design win growth on some of the pre-Nexus products as well. Some of those share gains are where we've seen design outs of competitors in favor of Lattice devices, I would say that crosses both Nexus and pre-Nexus and certainly aided by our software portfolio.

There are no further questions. I'd like to hand the call back over to Mr. Anderson for closing remarks.

Thank you, operator, and thanks for everybody for joining us on today's call. We're pleased with our continued execution and strong results and really excited about the opportunities for Lattice. We're certainly cognizant of the macroeconomic headwinds that are out there, but excited about the Lattice-specific growth drivers that we see ahead of us. And then, of course, we're very much looking forward to sharing more details about Avant at the launch event that we'll host on December 5. Operator that concludes today's call.

Ladies and gentlemen, thank you for your participation. This concludes today's teleconference. You may disconnect your lines at this time, and have a wonderful day.