Ladies and gentlemen, thank you for standing by. At this time, all participants are in a listen only mode. I would like to welcome everyone to the latest Semiconductor Fourth Quarter Fiscal Year 2019 Earnings Release Conference Call. A replay will be available approximately 2 hours after the call day. The replay dial in number is 4045373406.
The conference ID number is 817-6926. The replay will be also accessible on Lattice website atlatticesemidot call. I would now like to turn the call over to Rick Mache. Please go ahead.
Thank you, operator, and good afternoon, everyone. With me today are Jim Hansen, Lattice's President and CEO and Sherry Luther, Lattice's CFO. We will provide a financial and business review of the fourth quarter of 2019 and the business outlook for the first 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 latassemi.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 that actual results may differ materially. We refer you to 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 first 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 presented by us 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 provided reconciliations of these non GAAP financial measures to GAAP financial measures that can be found on the Investor Relations section of our website. Atlattassembler.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. As I reflect back in 2019, my first full year with Lattice, I want to thank all of our customers, our partners and investors for supporting us as we began transforming Lattice and putting the company on a much stronger trajectory. I'd also like to especially thank my Lattice team. I deeply appreciate all of your where we're headed. Highlights from our full year of 2019 included significant improvements across our key financial metrics, For example, non GAAP gross margin expansion of 210 basis points year over year as we began execution of our product cost reduction strategy and our pricing optimization strategy.
Non GAAP net income increased 88% year over year as we optimized our spending and refinanced our debt to reduce our interest expenses. Again, we delivered much stronger cash generation in 2019 as we more than doubled our cash flow from operations on a year over year basis In addition roadmap. We've begun delivering products on a faster, more predictable cadence, with a great example of this being the launch of our neXus platform this past December ahead of schedule. Over the past 12 months, we've also dramatically increased the depth of our engagement across our key strategic customers. We're encouraged with our progress in 2019, but we have much more work to do as we realize the full potential of Lattice.
Let me now provide an overview of our business by end market in 2019. In the communications and computing market, revenue increased 27% year over year, as we of our products that are used in both server and client computing platforms. For example, in servers we're benefiting from increased attach rates and higher ASPs versus the prior server generation. And we're working closely with our key server customers to add more value to their future platforms by providing increased hardware security functionality. We saw a healthy growth in 5G revenue in 2019, and we expect revenue to continue to grow as the 5G wireless infrastructure build out progresses over the coming years.
Turning now to the industrial and automotive market. Revenue declined only 4% in 2019, despite the challenging macroeconomic and trade tensions that impacted this segment. We continue to believe this segment will remain a long term growth factor for us. Given the breadth of applications that we serve, including robotics, factory automation, embedded vision and the increasing level of electronic content in autos. Turning now to the consumer and a continued shift in our revenue mix towards our other market segments.
Within consumer, our focus is on applications with multiyear revenue streams and higher profitability where our solutions add value by enabling customers to differentiate their products. I'll now shift to some highlights of our recent product roadmap execution. In late 2018, shortly after I joined Lattice, we went through an extensive R and D portfolio optimization process where we eliminated low return programs and concentrated our R and D investment on the most strategic and highest return program In the second half of twenty nineteen, we started to see For example, our CrossLink Plus product, which was launched ahead of schedule in Q3 of twenty nineteen, quickly entered production and generated meaningful revenue for us in Q4. We continue to be pleased with the customer adoption and expect this product to continue to ramp. Another example of our accelerated roadmap cadence is the launch of our neXus platform ahead of schedule this past December.
The neXus platform has been architected for power efficiency, enables a significant power reduction for our customers across a broad range of applications. In addition, up to 75% better power efficient compared to our competitors, we also demonstrated significantly better performance in applications, such as AI and embedded vision. We're very pleased with the broad customer attraction on our NexSys platform. I'm also pleased to announce that as part of our strategy to increase our investments in application specific software solutions, we'll be launching the first version
of our
embedded vision stack in late February. This is another proof point targeted for the second half of twenty twenty. In summary, 2019 was an important year for us and I'm very pleased with the progress we made. We've strengthened our product roadmap, accelerated the cadence of new products, and deepened our relationships with key customers in all verticals, while driving major improvements in the company's financial results. As we begin 2020, our team is energized and focused on executing our strategy for sustained long term growth and profitability.
I'll now turn the call over to our CFO, Sherry Luther
Thank you, Jim. In 2019, we are pleased that we delivered significant profit expansion, record cash and a further de levering of our balance sheet. We continue to make substantial progress toward the long term financial model we communicated at our Investor Day. Let me now provide a down 3.1% sequentially, but up 4.4% year over year. Revenue growth in Industrial And Automotive set by sequential decline in communications and compute, as well as consumer.
Gross margin on a GAAP basis was 59.2% compared to 59.4% in the 3rd quarter and up from 56.6% in the year ago fourth quarter. Our non GAAP gross margin was 59.6% compared to 59.8% in the prior quarter. And up from 56.7 percent in the year ago fourth quarter. In Q4, our product margin increase offsetting some of the reduction in gross margin gross margin on a GAAP basis expanded to 59%, up 400 basis points from 2018. Our non GAAP gross margin for the full year 2019 was 59.3 percent, up 210 basis points from 2018.
The gross margin improvement in the year demonstrates meaningful progress as we continue to execute on our product cost reduction and pricing optimization strategies. Q4 GAAP operating expenses were $43,800,000 compared to $44,800,000 in the 3rd quarter. On a non GAAP basis, operating expenses were $35,300,000 compared to $35,900,000 in the 3rd quarter. As a percentage of revenue, operating expenses were approximately 30 In Q4, R and D increased to 18% of revenue, while SG And A was approximately 17% of revenue. For the full year 2019, GAAP $1,000,000 for the full year 2019 declined approximately 10.5percentto144.7000000 We continue to focus on driving SG and A efficiencies to achieve our target model, while prioritizing investments in support of our product pipeline and growth opportunities.
EPS was flat sequentially in Q4 with Q3 2019. For the full year 2019, GAAP EPS improved to $0.32 per share from a loss of $0.21 per share in 2018. EPS on a non GAAP Driving cash flow generation continues to be in cash $118,000,000. At our Investor Day, we detailed our plan to actively de lever the balance sheet. In 2019, we made $117,000,000 in total debt payments.
As a result, our non GAAP debt leverage ratio as defined in the credit agreement is now 1.3 as compared to a leverage ratio of 3 at the end of 2018. Let me now review our outlook for the first quarter. Revenue for the first quarter of 2020 is expected to be between plus or minus 1% on a non GAAP basis. Total operating expenses for the first quarter are expected to be between $36,000,000 $37,000,000 on a non GAAP basis. As we begin 2020, we are excited about the opportunities in front of us, We remain committed to and our shareholders.
Our first question comes from the line of Charlie Anderson from Bellhart And Company. Your line is now open.
Yes, thanks for taking my questions and congrats on a really solid year. I wanted to start with the guidance. It's little bit of a wider range than last quarter. So I wonder maybe you could kind of speak to what went into that. And I'm assuming this was maybe part of it, just the coronavirus impact that you're assuming you're going to be dealing with here in Q1, whether it be on demand side or disruption side, what have you?
And I've got a follow-up.
Yes, thanks, Charlie. Yes, that's exactly right. So we did widen the range for the revenue guidance slightly On the gross margin and OpEx ranges, we left those similar to prior quarters, but on revenue range, we widened it slightly. And you're right, it's related to potential uncertainty around the coronavirus. And we just thought it would be prudent to widen the range just a little bit.
And then you had a follow-up, Charlie?
Yes. And the NexSys, it came out towards the beginning of December. I know it's only been a couple of months here now, but I wonder maybe, Jim, if you could kind of speak to the initial traction that you're seeing. I know you'd hope to potentially get some revenue by the end of the year, but maybe more so next year, just kind of update us on how that's going so far?
Yes, great. Yeah, as you know, we launched our new Nexus platform in December of last year. Actually, it was originally scheduled to be launched the first half of this year, but our engineers were able to execute ahead of schedule and we were able to launch in December, which I'm I'm very happy about. And I want to thank again the Lattice engineers for all their hardware on that. As we talked about in December, in this initial customer traction has been very strong.
We have over 65 customers that are engaged with an access platform We've got over 35 or so customers that were part of our early access program. And so we've had quite strong engagement. I think that really speaks to the competitiveness of the platform. NexSys is a full grounds up rebuild of our FPGA platform. Both from a hardware and a software perspective.
We launched the very first device in the family in December. When we look at that versus competitor devices, what we're measuring is up to 75% better power efficiency. And for our customers, that's a big deal. That's a meaningful difference and a big competitive advantage. And so, yeah, we're quite pleased with the customer traction.
We've, as we also shared in December, we plan to introduce a couple of additional NexSys devices throughout this year, 2020. Targeting a new device launched in the first half of this year and another one in the second half of this year. So customer traction, we're quite pleased with And then you mentioned, revenue expectations. Yes, I would still say, for this year, we may see a little bit of revenue from the NEXUS products towards the end of this year, but would expect the ramp to be more material, in 2021 next year.
Okay, great. Thanks so much.
Thanks, Charlie.
Our next question comes from the line of Mark Lappesys from Jefferies. Your line is now open.
Hi, thanks for taking my question. I had 2 on the first on the comps compute at it looks like was it down sequentially? I guess, if I looked at Intel and AMD, it seemed like they had pretty solid sequential growth in the fourth quarter. So I was just trying to reconcile the difference between the 2. That's the first question.
And I had a follow-up.
Thanks, Mark. Yes, there was a decline in comps and computes sequentially from Q3 to Q4. I will point out that on a year over year basis, us in Q4. If you go Q4 to Q4, I think the growth was about 18% year over year. And then that segment grew, I think, 27 percent year over year for full year.
But we did see a sequential decline. If you look within that segment, actually the computing portion of that segment was relatively flat Q3 to Q4 and the decline was primarily driven by, communications. We saw a drop off in demand across a number of, a number of communications customers.
Okay. That's really helpful. And then on the NexSys platform, what What kinds of customers or applications are you seeing the most interest? Where do you think you'll see the most success in that as you start to ramp? Thank you.
Yes, thanks. Great question. We're seeing customer adoption and traction across all markets. We're seeing some nice early access customer activity around industrial, things like industrial automation, robotics, automotive electronics, comps compute consumer. Basically, all of our segments, we have customers, customer traction that's active.
The competitive differentiation or the value of that of springs, especially around power efficiency. So I mentioned earlier, up to 75% better power efficiency relative to our competitors. That's really compelling to customers across multiple markets, especially when you're talking about edgeputing applications, IoT, industrial IoT or inference at the edge of the network. And so, yeah, we're pleased with the customer traction and it's pretty broad spread across multiple different markets.
Thank you.
Next question comes from the line of Kristen Guerra from Baird. Line is now open.
Hi, good afternoon. As your gross margin outlook is now fairly close to 60%. What are the gross margin levers for this year and before the ramp of Nexus? And then also if you could talk about the other operating margin levers for this year?
Yes, thanks Tristan. So first of all, on gross margin, I'll take you back to our Investor Day in May of last year. And just as a reminder, that our long term business model is to be at gross margin levels that are above 62%. We're very focused on that goal and have plans in place to drive towards that goal over the coming years. I would say that the gross margin improvement that we're driving comes across, comes across 3 categories: 1st category is pricing optimization This was a strategy that we built out actually at the end of 2018.
We started implementing in at the beginning of 2019. And that's about really pricing our products I would say really optimally in the market, really getting the fair value for our products, for product pricing in the market. And then we had a second strategy or second category of product cost reductions. Again, we have built out a pretty comprehensive strategy end of 2018, started executing that in early 2019 that yield a benefit for us in 2019, we're expecting that to continue moving forward. And that's about driving just a constant treadmill of reductions in our product costs.
And then the 3rd category is, as we shared at the Investor Day, was, over the coming years, we're expecting growth to primarily come from our industrial and auto segment, our comms and computing segments, those as the growth comes from those segments, and our mix shifts towards those segments, that naturally provides some gross margin uplift in terms of mix shift. So those are really the 3 categories that we're driving over time to achieve that over 62% gross margin target. And then in terms of some of the other operational, things that we're focused on. We continue to focus on OpEx, for instance. Now we are at approximately at our target model.
So for total OpEx, our target model is 35% of sales. We're at about that in total. But if you look within that at R&D And SG And A, we're a little bit underneath our target of running R&D at 20% and we're a little over our target of running SG and A at 15%. So on SG and A, we have some work we still need to do that'll come from direct dollar cost reductions as well as better scale as the revenue grows. And on R and D, we can expect, over the coming quarters for R and D to increase in a gradual, careful way as we continue to invest in our product line.
So that would be kind of what to expect on OpEx. And then, Sherry, maybe you want to add a we're assuming that this year some improvements in terms of interest expense maybe you want to comment on that.
Yes. Before that, I'll just add that, in terms of SG and A that in 2019, we ended the year with SG and A at 17.7 percent of revenue, which is down quite significantly from 2018, which was 21%. So lots of progress made, but as Jen mentioned, we've got more work to do to get down to our target level for SG And A. Operationally, you'll also notice in Q4, we had some favorability in interest expense, and that's because in Q3, we really locked into the lowest interest rate tier for our debt. And so in Q4, you saw a full quarter of that.
So you'll continue to see that benefit, into 2020, from the lower interest rate. So that's pretty exciting.
Great. Thanks for the details. And then, any color on end market trends quarter over quarter embedded in your Q1 guidance?
Yes, a little bit of color on Q1 guidance. If you take the midpoint of our Q1 guidance, it's roughly flat, Q4 to Q1. But within that, we would probably expect consumer to be down a bit. Typically, consumer is a bit seasonally down from Q4 to Q1. And, we would expect that to be offset by the industrial, automotive, comps and compute segments.
Yes. Thank you. Next question comes from the line of Alessandra Vecchi from William Blair. Your line is now open.
Hi guys. Congratulations on a wonderful quarter. I just wanted to touch base on the cross link platform or I should specify cross link plus I think in the past, you had said you expected, initial revenue in Q4. I was just wondering how that was trending, how adoption was looking and really how we should think about the contribution there as we move out into 2020 and beyond?
Yes, thanks, Alex. So CrossLink Plus product, if you recall, we launched that in Q3 of last year. In fact, that was another product that actually launched a bit ahead of schedule. The engineering team did a great job executing on that. It was able to launch in Q3.
And then, we started to ramp that product actually very quickly. We ramped it, started ramping in Q4 and did generate a meaningful amount of revenue in Q4, which I'm quite pleased by. Our product engineering team did a great job getting that into the market and there were some really strong initial customer demand for that We expect that product to continue to ramp, this year and into the following years. It's really a nice unique product with some unique capabilities and we've seen a strong customer adoption and traction for that.
Super. And then similar in the same vein, just on the mock XO3D, I think you guys initially had been targeting server customers and we're sampling at quite a few there. Any sort of early traction or feedback or samplings on the client side?
Yes. So we've seen, the initial traction and focuses primarily on the server side, as you mentioned, and quite pleased with that progress. We, we launched that product last year. We expect product to enter meaningful production this year and to start to ramp into production in a server platform. So we're excited about that.
And yeah, you're right. That product, what that does is provide hardware level security or platform root of trust That is applicable beyond the server platform. That could be used in client devices. That could also be used for instance in networking platforms, anywhere where you want to provide very basic hardware level root of trust security on the platform. And so we're pursuing those applications as well a little bit early for me to comment more specifically on that, but we're certainly engaged in those opportunities also.
Perfect. Just lastly, more out of a curiosity since you guys have been delivering ahead of schedule on products. Was the embedded vision stack? I know you had talked about on the December event, 2 new software stacks coming this year. Was the embedded visual one a little bit earlier than expected or was it sort of in line with your thoughts?
Yes, it was about it was a month or 2 I had schedule, we really pushed the team. Yes, we were really pushing the team to be ready for embedded world. And embedded world happens at the end of February. And so, yeah, we wanted them, we wanted to basically roll out that software stack at embedded world. And that's the schedule that we're currently on.
So it was a bit ahead of schedule, which we appreciate from the engineering team.
Next question comes from the line of Matt Ramsay from Cowen.
Call through on behalf of Matt. Thanks for taking my question and congrats on the results. It was nice to see the return to year over year the last couple of quarters. As we start thinking about moving towards that double digit target over the next few years,
how much would you say
is dependent on new product traction from NexSys portfolio build out versus mix away from legacy consumer or any type of end demand recovery that's embedded in those expectations? Thank you.
Thanks, Josh. Yes, I would remind you that not just NexSys that we launched last year, but we actually launched a couple of important products ahead of that, which we've already mentioned a little bit on this call, which is MoKX-three D, remember, we launched that in the first half of twenty nineteen. And, that's the product providing platform root of trust security in applications like servers. And then Crosslink Plus, which we talked about, we expect those products to help drive revenue in 2020 and beyond. And then neXus would come along a little later in time.
But yeah, we remain focused on our long term business model goal, which is to get to that low double digit, consistent sustainable revenue growth. And certainly the new products that we're launching, like the Crosslink plus, MOCX-three d, the neXus, the different neXus products that'll come out this year, as well as the software stack that we're rolling out this year will help contribute and solidify that growth in the future.
Thanks. That's helpful. And then you guys put up a pretty decent number in the Industrial And Automotive year over year growth. We heard from some of your peers that there is they're seeing signs of end market stabilization, some said recovery. I guess, how would you characterize it as you're seeing it?
Is it more of a macro trend or new product traction that you would say is driving the year over year growth? Thanks guys and congrats again.
Yes, thanks, Josh. I would say that, if you look at our results in industrial auto, in 2019, certainly we were impacted by the same macroeconomic slowdown or softness that was pretty broad based across that sector that, other companies were affected by it as well. But we do have some lattice unique, growth drivers within that segment that helped us, I think, perform a bit better than the rest of the industry. Just some examples of that would be, industrial automation, industrial robotics, industrial safety applications, as well as just a number of different automotive electronics applications. So there's some nice design wins and customer engagements that we have in there that are helping us perform, I think, a bit better than the general market.
And as we mentioned at our Investor Day back in May of last year, we do believe this is a long term growth market for us over the coming years. It's really this, market industrial auto as well as comps and compute that are primary growth factors over the coming years.
Again, ladies and gentlemen, if you have questions at this time, Next question comes from the line of Christopher Rolland from Sickihara. Your line is open.
Great. Thanks guys. The long term model is shooting for double digits here. 2019 was obviously pretty challenging for everybody, but do you think you could hit that double digit outlook for 2020 and perhaps talk about kind of the products that build to help you get there?
Thanks. Thanks, Curtis. Yeah, we remain committed to our financial model that we put out at that main investor meeting. And not just the revenue growth, but as I mentioned a little earlier in the call, we also put out goals around, gross margin expansion and expansion of operating income as well. And so we remain committed and focused on all of those goals.
On the revenue growth in particular, yes, the model that we put out was to achieve low double digit revenue growth in the outer years. There's a number of different contributors to that. Both from a market perspective and from a product perspective, from a market perspective, it's really, comms and compute industrial auto within comms and its server and client computing platforms helping drive that growth as well as 5G wireless infrastructure build out. We're still in the very early stages 5G infrastructure build out where you have a good position across multiple OEMs in that, in that application. And as 5G wireless structure is built out over the coming years.
We expect that to be a growth area for us. And then in Industrial And Automotive, some of the things that I mentioned earlier, industrial automation, automotive electronics. And really, the products that will help drive that, are some of those products that we launched just this past year. Mock X03D, for instance, is used in servers and will help drive our growth in in the computing space, but a Crosslink Plus product is actually used across a wide variety of different applications and markets. And then NexSys as well, our brand new FPGA platform for which we'll be rolling out new family members over the this year as well.
That will help, help drive growth across those segments as well. And so there's really quite a number of different, growth vectors across those markets.
Thanks, Jim. And then one clarification and a question as well. The clarifications around compute Intel had pretty strong guidance here in AMD as well. Just wondering why compute was flat. And then for kind of a follow-up question, Sherry, you're pretty close to getting to net cash at some point here.
And so in terms of the balance sheet, how do we think about what you're going to do with some of that cash or are you guys have you thought about a dividend? Is that too early in your kind of growth process here? Or is it more about acquisitions are you looking for tuck ins in the PGA space or other areas of adjacency? Just any color there would be great.
Chris, on your first question around compute in Q4 and sequentially from Q3 to Q4, I will take the opportunity to point out that on a year over year basis, the CommScope segment did grow 18% year over year, which is not a shabby growth, right? But, from a Q3 to Q4 sequentially, yes, it was roughly flat. From quarter to to quarter demand and fluctuate. But I think we're seeing very good positive growth in that segment on a year over year basis. And Sherry why don't you go ahead with the cash question?
Sure. Yes. Thanks, Chris, for the question. So yeah, for Q4, we were at net cash of about 29,000,000 for the quarter. So pretty excited about that.
But in terms of, and of course, obviously having paid down the debt quite substantially with a leverage ratio of 1.3 clearly paying down the debt was a key focus on top of making investments in the business and the R and D investments that we talked about as well. As we look forward, we'll continue to evaluate the best use of our cash. I mentioned in Q3 that We are locked into the lowest interest rate tiers. So we're already at that lowest interest rate, and won't go any lower than where it is right now in our debt. But we'll continue to evaluate the best use of our cash, looking at all options, continuing to invest in R&D, evaluating whether we continue to pay down debt and other alternative uses of cash.
So all will be evaluated as we move forward.
Next question comes from the line of Richard Shannon from Craig Hallum. Your line is now open.
Hi, Jim and Sherry. Thanks for taking my questions as well. Maybe I'll ask question on the comms space. You talked about computing within your bucket being kind of flat sequentially in comms down. Wondering if you can help delve into the relative trends of 2 wired and wireless there.
Was there a pause in 5G in any way? I know it's we're very early, but maybe you can comment quickly on the on how that was going in the fourth quarter.
Yes, sure. Thanks, Richard. Yes, we did see, as I mentioned earlier, sequential decline in comps from Q3 to Q4. It was across the number of different customers and it was across both wireline and wireless And I do think there is a little bit of pause or slowdown in 5G related build outs. We're still early in 5G wireless infrastructure builds.
And so it can be lumpy from quarter to quarter in terms of the demand. That said, if we look at full year 2019, we were actually quite pleased with our 5G wireless infrastructure revenue. And that certainly was a contributor to the 27% year over year growth that we saw in communications and computing. And we remain we remain, convinced that over the long term, 5g Wireless infrastructure is both a growth driver for the industry, as well as Lattice as we have good position in control plane applications in 5G wireless infrastructure across the number of different customers. So we do think that is a multiyear growth opportunity for us.
Okay. And just to follow-up on that quickly, Jim, near term, do you expect to see of 5G wireless start to pick up here, is that embedded in your guidance for this quarter?
Yes, I would say in Q1, I mentioned, really a consumer, we expect to be down slightly. And then the comms compute industrial auto, those segments together, we would expect to be up sequentially. In general, we would expect 5G to help, help contribute to growth in, in 2020, but also beyond as well since the 5G wireless infrastructure build out will be over multiple years as it rolls out across multiple geographies.
Okay. A quick question for Sherry. Actually a few multiple or a few questions here on the financials. OpEx up a little bit sequentially into the first quarter? Is that some sort of structural increase there?
Or is that more of the kind of the payroll taxes that come? And then from, for taxes and non operating other income, are those expected to be kind of similar in the first quarter that you had in the 4th?
Yes, sure. Thanks, Richard, for the question. So for OpEx, our guide is up slightly from, from Q4. And that's really a function of, you know, the timing of some of our spending. You know, we've talked about increasing our investment in R&D, for example, to get closer to our target model of 20%.
So we expect to continue to make the timing of program expenses will fluctuate quarter over quarter. So that's sort of a normal thing that you would expect to see. That's how I would look at that In terms of the OIE, if you look at tax expense, I think if you look at 2019, our effective tax rate somewhere around 2%. And so that's sort of what I would look at going forward. It's a good way to model.
And then on our interest expense, as I mentioned, Q4, you saw a full quarter impact of our lower interest rate. And so that's what you could look at going forward.
Okay, perfect. That's all the questions for me. Thank you.
Thanks, Ritchie.
And for our last question, we have Hans Mosesman from Rosenblatt. Your line is now open.
Thanks. Congrats guys for a solid year. Hey, Jim, quarter to quarter, as you look now into 2020. Are you the same level of cautiousness? Are you more optimistic Are we getting out of a down cycle like some have said?
If you can just give us some color of your kind of attitude for as we enter 2020. And I have a follow-up.
Sure. I think one positive, that we saw right at the end of 2019 is related to industrial and automotive. At the end of Q3 of last year, we started to see a little bit of further weakening in that sector. And then that rolled into the beginning of Q4. But towards the end of Q4, we started to see an tick in demand.
And so that was a nice indication that we may have that market may have stabilized and we may have hit bottom there and that it may improve moving forward. So that's one sign that we were happy to see. But beyond that, I would say that in general, if we look across the markets, North America looks quite strong to us, the Asia market continues to be relatively soft, but I would say stable, with the kind of the unpredictable element being the coronavirus and then Europe being kind of somewhere in between there. So that's kind of the color I'd give you by end market.
Yes, that's very helpful, Jim. And then my follow-up, in terms of, since December, past 1, 2 months, for Nexus, in the designs that you're being considered, are you displacing other FPGAs or what kind of solutions are you coming up against, for Nexus and Design Wins? Thanks.
Thanks Hans. I would say it's both, classic at PGA competitors. But in some cases, in some applications, we're going up against things like, for instance, microcontrollers. And so against the FPGA competitors, we're able to bring a pretty significant power efficiency advantage. The initial next device that we launched in December, we showed at our launch event, some real time measured power efficiency comparisons versus our 2 primary competitors.
And we were measuring up to 75% better power efficient versus our competitor devices. And so when we engage at the customer level, that power efficiency advantage has been a big benefit to our customers and has given us some really good strong momentum against our FPGA competitors. And then in other applications, maybe where typically an MCU has been used in the past. They're certainly the power efficiency advantage helps, but, also it helps that, our FPGAs can be programmed for a parallel data pass or for parallel processing, which is very useful in artificial intelligence influence algorithms. So the processing of inference algorithms, we've been able to demonstrate very, very good performance and especially good performance per watt and that's helped us, to displace microcontroller applications.
And so I would say we're seeing kind of good traction and good competitive footing versus both those types of competitors. Thanks
Hans. Ladies and gentlemen, that concludes today's Q And A session. I would now like to hand the call over to Lattice's President and CEO, Mr. Jim Anderson for closing remarks.
Thank you, operator, and thank you, everybody, for joining us on our call today. So in summary, 2019 was a strong year for Lattice and we made significant progress across many fronts, with improvements in our product roadmap, our execution, customer relationships, and certainly our financial results. And I'd like to thank again the Lattice team for all their hard work and dedication. We're starting to see the results of that hard work, but as I often remind the Lattice team, we are still in the early stages of what we believe Lattice can achieve. As we continue to execute our strategy and build shareholder value.
I want to say we appreciate your support and look forward to updating you on our continued progress. Operator, that concludes today's call.
Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.