QUIK - Earnings call transcript Q3 2018

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Operator

Hello and welcome to the QuickLogic Third Quarter 2018 Earnings Conference Call. [Operator Instructions] As a reminder this conference is being recorded. I would now like to introductions your host for today’s call, Moriah Shilton.

You may begin.

Moriah Shilton

Thank you, Towanda. you XXXX us Results thank Third for and Fiscal Quarter Conference everyone, for today joining QuickLogic's Welcome, Call. With President us and Faith, Chief Executive today Officer, and are Brian Dr. Officer. Chief Cheung, Financial Sue

short we safe Before will I read harbor begin, statement. a

results its future Some design and products; statements the involve financial to forward-looking gross revenue, operating projected production timing cautionary pertaining customers' evaluation in mature ability not to expectations products, risks today production to expenses, activity relating impact the QuickLogic's but margin, that cash. stated appear including These statements of the expectations market with profitability design shipments; considered comments that stock warnings uncertainties, revenue expected new the performance, company’s QuickLogic's opportunities makes be timing future limited shipments; could are that company’s and and statements acceptance in price and changes QuickLogic of filings. conjunction and the and its from should systems; for start schedule of broadening and convert to new into date partners, and SEC ecosystem

For website. forward-looking on that are the please and its that filings SEC’s may differ and events additional future statements SEC call posted website refer the to the all involve this made. statements information, and in cautioned risks Investors Company's uncertainties from materially

call, LinkedIn revise Twitter its other note, of page account, of statements publicly risks, its Company’s the the its no investor Such with QuickLogic conference of material to release XX, assumption, and of any day Factors events. upcoming may XXXX, distribution information refer please and statements of SEC light forward-looking Company corporate and These and information to fiscal March the or at the the about matters. The QuickLogic blog X, and XXXX. the December under as disclosure made comply in XX-K Regulation it’s announcements, uncertainties new page the other Please Annual future all obligation today, attendance as website, Facebook of undertakes live. in products, under the conference or HotSpot, financial uses management any revisions Risk forward-looking filed and on details the channels the is are Report planned discussed FD. to being to use industry year of obligations open with heading For webcast conferences, on more may those and Form and call information, its be ended these QuickLogic is information channels deemed its for

start will call And QuickLogic turn go financial to Cheung with strategic Company's results President over provide ahead, and for this remarks Faith, call Brian. pleasure Sue it and At CEO. guidance. questions. open is from the the closing my time, We will call today's to update CEO, then Brian Faith. Brian and deliver the will Brian CFO, Please

Brian Faith

application. our powered MOU last Moriah, is that we and company thank with we call with smartphone conference mentioned conference and our outlook EOS value AC on leading last beyond. a and joining on, call. the our Japanese involvement conference always bolsters have consumer in always with our scope We’ve of that you, the expanded share call, a our electronics company. and for QX SX our our Since Thank broadened leading designed listing quite of you to for bit I exciting news today you XXXX all have XXXX

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ESO we revenue proud I'm to As win to very and we QX of SX. out high announce continue designs. ESO in line record SX impressive moved shipped some

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have design for that products. unprecedented be OEM company. big I and to of an broad the consumer is high-volume for and standardize in leading the a MCU OEM smartphone quarter major EOS the engagements of future agreed across announced signed Japanese With in expanded standard We with IOT to a Last agreement I and used scope very the release electronics this all product applications large expansion, on a quarter a ongoing our we've of is a as Last a QuickLogic. that selection company. for with a SX MOU new we with for significantly. the smartphones, EOS value scope mentioned of Since SX scheduled then XXXX. has by deal phones products the win significant The EEBDK

I by product total The multiple more expected XX this design consumer lead QuickLogic. The operate I the core additional continue is the at provide range this platform. company that to core CES. seven from volume to believe we will version While low or for be this the platform OEM have we design new integrating Higher be figures. could that is to OEMs. a electronics into models use and initial The that OEMs color In under that for have integrated in used with is restrict NDA design from an various are a will to design four quarter. a class can platform, committed be models mid platform the models shown of there values

late production the initiate with ramping opportunity models stages We platform design at XXXX in expect first are QX And the to in with that subsequent of volume introduced this the shipments early originated CES we with from quarters. new OEM in design. the

addition of production design, to potential. consumer EOS to low in successful are figure annual move has will and This first QuickLogic for engagement it are mid category XXXX. into winning If in consumer electronics the seven we another of with leading OEM. new yet application early during expect we half a recent represents success the we an our totally In SX stages product in goods the

SX the categories consumer also would a design with as that of high volume all this variety platform QuickLogic. of closely EOS new We for it which company evaluates targets for new represent are product working products

revenue QuickAI call looking design the revenue some future over turn believe And reporting news fourth I'm to we drive I to announce in exciting figure this I that first share. very Sue, in Before seven QuickAI towards quarter. QuickAI will proud we to material low anticipate the the have win XXXX.

the years in cycles In have drive potential already that. extend other to several low product engagements we XXXX to and life addition that that beyond mid revenue this seven for to figure QuickAI have have aggregate

support I introduction that in you realize very from anxious as those their other and move office you provide a material leaves QuickAI opened have them. rapid to activities. and San as hear new to these revenue many given development engagements with to are We to Diego engineering questions answers I'm

this that financials. we like to SX turn of are the would the QuickAI about role solution. our integrated with very more important Sue to tip now ready not played to illustrate and how EOS plan color quite SoC our to for I provide is call high the later However Sue? value a our discussion to competition, in hand over the quarter

Dr. Sue Cheung

thanks us today. Good reporting and Brian. we you, are to note our Thank Afternoon results. for Please joining non-GAAP everyone

to and press for of refer today may results issued detailed to other our financial we release the reconciliation You non-GAAP a GAAP statements.

We table have also page an posted financial updated IR that data. and on web provides current our non-GAAP historical

million within range. For and the XXXX, third $X.X was total guidance quarter revenue of our

mature and $X.X revenue revenue product was was new $X Our million. million product

third Operating due of expectation New continued product XX% delays within to usual million product $X.X SG&A Due projects. This quarter, that above the in lower income of million, Net accounts currency shipments associated payable. the we decline per to other decrease had driven from higher our within benefited net attributable and of cash cash share revolving the expenses were mature range. our revenue taken revenue new in certification. which mostly than with a to due the for during expenses in which Bank the increase our and up agreement receivable QX Commerce $XXX,XXX $X than taxes of four for range. in of large a by base, customer was rounded deliveries also XX.X% due And reserve and during in million for entered accounts forecast R&D expectations quarter. below was QX the was loss were In our fluctuation. anticipated seasonal our a the $X.X loan QX to was timing below XXXX our million within offset our were September range. and usage we was usage engineering Cash usage was expectation, timing into Heritage more Silicon to $XX,XXX our exchange forecasted than was and demand. QX our in third Net of total Valley the which to our below QX mid was expenses XXXX expense due bank. the The certain total million. expected $X.X quarter term facility than or foreign our with than net the was million significantly for $X.X success million our forecasted R&D years with $X.XX of two increased working facility lower expense greater margin of were prior expenses diversifying was customers $X in with replaces $X.X gross credit credit. capital and in and line revenue it access to forecast to Amazon charge credit

we which As orders. facility balance of their have noted the that from on million we our illustrates have customers $X intent sheet borrowed to to our new this support a we capital

confident is to the needs as We’re that revenue Heritage capital our partner support future working right grows. our Bank

Turning to outlook. the fourth quarter XXXX

is $XXX,XXX. approximately revenue revenue Our minus which revenue decrease $X.X a to material revenue non includes be XX%. more by On expect GAAP gross plus million we approximately revenue. matured plus non be or basis a anticipated comprised contribution margin from forecasting minus new to in guidance bridge We're $X.X offsets for is Total to driven a the of XX% increase operating revenue revenue. higher plus be approximately of that our million had minus expenses or than expected X%. display $X.X in product mostly GAAP QuickAI new yield revenue is product sequential SX product QX $X or million of and expected approximately The million

to initiative. in our GAAP and to is sequential be non expenses increase QuickAI non be GAAP attributable The our expenses expect approximately million cost $X.X to million. with $X.X higher R&D embedded associated We expenses forecast a approximately R&D FPGA SG&A and

our is million, a We charge our our $X the At expense midpoint approximately to share. $X.XX other of taxes non-GAAP of forecast, per loss and or expected approximately income, $XX,XXX. be be expect will

difference As fourth GAAP be expect me timing we The anticipated we main was expense, $X increase to the case $X.X In non-GAAP expenses R&D in our over the to usage to attributable his for quarter. capital approximately cash. compensation prior between turn in the the million mostly expected stock-based is results and QX, back requirements. now cash to and the quarters, the With for use of call sequential between Brian our $XXX,XXX is increase that, closing working let in remarks. to which

Brian Faith

Thank you, Sue.

I the highlight this the our opening The take want we believe beginning that license important MTLA XXXX. breaking see a take this are We the we year to adoption for to what stalling catch year that embedded to for targeting this will signed this strategy Before I IP call some in several and We to earlier FPGA to from introduced of call. moment engagements. IP MTLAs expect more start were away our to conference Q&A, two sign points SoCs accelerate quarter. think QX investors loops ArcticPro is XX license agreements specific our

This that We new on, has OEMs moving likely products. to markets. certification adopting on are of to always from always OEMs in listening a our major away wide Amazon SoC seeing technology released is in from its end talk push always close listening mounting and always trend talk interfaces. SX for evidence interest are EOS voice increase variety

We that for Alexa to have to enabled. customers been release brand this new will have products them that as EOS now their are numerous enable SX and requirements adapting the waiting

late quarter XXXX. during QX this these of to the into production first move balance the and products expect We

smartphones, We with problems the With smartphone released has accept OEM EOS spring and value major to expanded feature during first agreed standardize have significantly We of in the its IoT our the the MCU on MOU, scope designs OEM. Japanese to smartphone SoC and SX of products. of our all this the XXXX. and be

new needed with more power our obvious or though SX SoC EOS In in external ultra for optimize selected designs absorbing applications to is where the of life counter otherwise the end and the the In ease the embedded Beyond that designs standby to FPGA. EFPGA provides that functions reduce platform these in mobile interface low power architecture are the these battery products that target subtle ICs. require we is would ability often power applications winning designs chip benefits multiple AC most the multi products SX requirements. by includes applications the EOS and core flexibility compliance with using embedded that FPGA

We a market new EOS with that leading consumer SX a platform category won QuickLogic. company for totally have represents the major design electronics

shown products We CES version expect the using first an in the at be four January. of integrated to platform

multiple Following products a introduce higher expect more XX design. QuickLogic. mid to potential the The for to that, products total of OEMs we using or have low volume new seven-figure platform

We company AC are engaged go XXXX. would with consumer into first a in are be for QuickAI a the production we high-volume design If received half To new another leading to powered successful, goods this market understatement. category an design QuickLogic. well for expect of is during we being say

I for deliver QuickAI in We that, our to in later number you integrated typically And high-value to material EOS successes. XXXX QuickAI a ahead and we about quarter. am brings sound At product original our of bottom-line, of think revenue with new providing markets lifecycles forward run quarters solution the several which years. forecast. with is strategy color its into growth SX many recent that revenue will QuickAI expect this report for our significant XXXX looking more to I beyond. vast appreciate believe QX, a potential is bolstered by is that and

to dependence year the turn customers require questions. far that Operator, on to also enter over believe with less single products and now for I We call are on single set like third-party would designs, next we qualifications.

Operator

Benchmark. Gary [Operator Mobley Instructions] comes question with first Our from

now Your line open. is

Gary Mobley

from into detail low know you’re going this million and is XXXX, a the and expect you with from to to in so not this engagement? I NREs about wanted to I’m get you that double-digit customer, type QuickAI, generating in the ask speak is revenue that lot respect just the of revenue you’re bags would really I customer. in whatever the engagement you dollars to early But the share wondering related QuickAI if of

Brian Faith

that are key is to is time and it So some question, for markets they how exploring NRE, company not product second it has targeting. of this revenue. of as They these a have use the applications quite now. broad they set particular firstly, products can your And AI element been

for an are solution way deploy those for their AI and and looking at product. been of have with has us events easy-to-use come that confluence think can how value they we’ve I a So integration. in where end they demand They've

year different say So events today that hand, company several and or traction cover have good the that confluence will in combination that will products it it’s be confidence the next -- and company. a give year. within led it is to with you said I you this -- across -- bag of for it it diversified be When has sort think outlook we this they I for with we next peers to to but all of gives year, us and have relationship have next think don’t the of that

Gary Mobley

this for respect Diego? project, the effort San R&D to With why

Brian Faith

and component solution a level software not and look where moved just good we now we AI the is a AI is lot a sensors when money in in our it’s in complexity. but There that is at a in the the there of of are lot AI as and question. just developing China of the innovation And is world happening in into to typically US. microphones, huge different That’s companies investment lot endpoint US processing, a products of the other today,

just in QuickLogic of team what customers. strong and R&D wanted believe And teams is we within software, that to we be for the in initiative on are close not executing of lot but was to strong R&D so that very a also to have our this going an embedded this AI type

there Bay got lead so that a lot actually we've office and flight down for that a And from of has if you look PhD software of embedded AI area, in engineers the at it's Diego they’ve kind. good an hour the to gentlemen all San software hired us and

combination, kind that So an you of it's here. look when at over

Operator

line from Desilva of Our Suji the question with Capital. comes Roth next

line open. is Your

Suji Desilva

some for you of So to increase guiding expect steady level thanks including will usage will for in the the the build be fourth quarter the to that or think at timeframe? XXXX have cash you inventory cash Do it this as you ramp customers usage.

Dr. Sue Cheung

are Yes, right. so you

we burn plus the average X about as that But we ramp-up increase. can't million rate the cash So current minus that’s level. at will run or see inventory, out,

Brian Faith

of where similar to me up to of let because we inventory I really Suji to build obviously just you went that is in And add think inventory, the hinder we finished where of that on of the processed want keep ramp make we to it that part terms do goods sure customers. your not here manage that is one and things question the our that

If you that few lead at time goes the for the is the short lot which time can and kept go look that and weeks to to foundry, market. long actually have, line in assembly now us it whip out package how so to is going we lead we a the take a through takes inventory of actually

So is inventory our above good think and to probably the the first so right cover a in or now well $XX coming position total right in now that. positioned revenue worth million for I EOS we’re

Suji Desilva

pretty yes, QuickAI a here. of thought curious this more product cycle longer quickly. given lot sounds be I'm I should be just And this interest turning obviously then complex, also would it

finding there to also is you’re I customer So gate? with out the I'm don’t relative curious interest, engagements traditional that a the QuickAI if geographic happening how know, is engagements and for of

Brian Faith

a So few answer. there questions to

PCB collection expertise have AI maybe think into design lot are pent-up hardware much I there’s of demand so that a expertise, customers software. for and do of Firstly embedded don’t bringing design

for that bringing market products we them of lot the very for that to are a to customers integrates our fact it the easy and makes that work use. So

us. cycle already how market makes a are bring we it for sometime to looking faster that on fact to AI the So it for

AI we think will industrial have is there do as a to be the type the form prioritizing. of That's do industrial already more terms found I think to near in prioritize going other to that use. category we’re being of to what I we are longer we very to how solution well on after classic start a and geographies term. we that develop purposeful just are rolling your are Korea have time trying customers products in see we go-to-market, that but and sort out the that that to there ones looking said. for lot about a North roll play I that just geographies, lot customers how some Japan committed are of so Europe, is developed that so out beyond of spend America, wanted of will To focusing being question areas AI, IoT to time about in where first, this we're IoT

Suji Desilva

of for what what's for The additional question then flow customers the embedded of starts be? licensing characterize would timeframe would to here sort milestones briefly last the revenue, you licensing the And here. how starting and then, is the MTLA the the FPGA, progression going

Brian Faith

test QX. early doing cycle There where I by where ETH going cycle back a chip a their around So be chips in we're cases times and six of that chip. at things to are are and the getting back of those cases from getting an chip probably on integration MTLA months order because of test test is use into test think the compressing

in about evaluation licenses that whole revenue. doing folks to have I that that not go then we’ve test is sign actual use customers as for timeframe order some sooner, to using make that deal their own may engaged chip. decision think there an to for doing And necessarily test the which why we’re within other been a to so a that And are funnel without that cases QX in chip quarters months for talking can

Operator

the Instructions] Shannon [Operator comes question of next Our line Craig-Hallum. Richard from with

open. now is line Your

Richard Shannon

I’m last you on statement with the topic up a following to here question MTLAs. before Brian. going just follow-up last the made Let me on ask

said MTLAs to is give the those? a that more magnitude us can any correctly on of and in there, fourth of expected quarter signed number detail the think you be you I you

Brian Faith

to Yes. this magnitude, sign We of expect dollars? number or about did several you quarter terms in talking are

Richard Shannon

can Both of, anyway, would great. either quantify if be you

Brian Faith

based these decision hands. say one so would I someone’s five. on know of not for I in somewhere the and don't So timeframe between companies, exactly making it's

hold process example. actual revenue, for value driver. million aggregate is for the to in $X for understand probably get to could of a be In the going try just to of the dollar frictionless company terms that's in not I’d the value, into of very north MTLAs those a technology what real translate We’ll in think huge of we make and value license a dollar say terms

Richard Shannon

were is foreign quarter? of that, happen And did those caller the the could I on understand first prior the the correctly revenues -- based in license question

Brian Faith

Yes.

Richard Shannon

Perfect, that's very helpful.

I of And here, sorry and fourth quarter questions guidance the sequence random the on the for got a question here.

can I coming wondering I specifically product QuickAI, other if the think correctly growth from is new into going characterize of growth certification? Amazon you SX Sue that how Bluetooth new are remainder the that from product this hear revenues the you through some it any talked of category customers Did about in our of sales.

Dr. Sue Cheung

mainly is So it EOS SX. driven by

So of QuickAI category. is EOS part

of of the so Bluetooth in EOS Some other be thing SX at by will the hearable driven majority Amazon for and QuickAI stack. those qualified part that’s that’s products --

Richard Shannon

That is helpful.

the the more I level million actually here Just few on into How you in think fourth talked should forma quarter. the I couple a R&D, to that X.X XXXX? being questions, a expect Sue for about of think we transition pro

Dr. Sue Cheung

I’d the to is X.X So per about average. million for at say million expect range R&D X.X or that going on quarter stay

Richard Shannon

a be you. may couple Brian questions for

think think prepared were think your to got and is its engaged had about a you hope priorities call the have variable you talking but on because bit little you shifted hold I the are OEM late this correctly, I -- QX of referring what I I kind one I in others. the and got there, design on with smartphone Is you win that accurate? that it's I that one that were in OEM some are remarks you

Brian Faith

QX same OEM, that correct. smartphone Yes,

Richard Shannon

Okay.

made time do that that kind consider could the for when could on when hold decision that being? be you of -- visibility and/or any on So just

Brian Faith

quarter have will consumer know originally point hopeful down I'm end what they to in that their that back whole went to caused I'm that because and at quarter. go the have call targeted in about there first made I but they that talked sure them not look and another this this fact at I market by product of the of sort pause is the also the planning process. the

this sure. the So I'm hopeful by quarter to of know don’t I but this end have decision for

Richard Shannon

hear applications are it qualified got on, that you did that one Actually TSMC you questions. you've at so the a say Brian, second I you two might like can you or last node what characterize or target? process

Brian Faith

another details kind give process of we coming maybe with did be support out at and the shortly that. We that about will TSMC a will press release

So sure in PR. call details not on going today covered the to and we are those that the will do make

Richard Shannon

wholesome question it about you expectation too year, something difficult next XX% I quarter sales last call. still your Last for online. anything is support for you of growth you jump talked are from now to visibility? I right or hear My this that the before on didn’t Is supporting

Brian Faith

why in really closing I bolstered supporting, that's used and opening That's word my full remarks. the

If for all of all this at more and concrete of had gives originally diversification than those us next just revenue our expansion that MOU, year. are the the back the QuickAI wins, sooner wins number OEMs with the very evaluate sort I think confidence and in then sales we of all the we've look what had at anticipated, that you funnel the large, of in

Richard Shannon

I these to particular sounded sure. because it wanted in wins, in it just some got sounded Just you’ve make great wanted like to progress platform make sure and

Brian Faith

Absolutely.

Operator

with the Our next Neaton Investment. line Rivershore comes of Rick question from

open. line Your is

Rick Neaton

you QuickAI you in are revenue near on for Can the ASPs that term? provide expecting anymore color the

Brian Faith

Yes.

the so to But reasons more too to should I which tuned little I’ve hold detail competitive for and product. in you’ll a well, on bit higher SX you software, for the the this for are think the the QuickAI where consumer just EOS all be takeaway significantly is a stay lot start really really been back about trying this aware mid call. double-digit than just ASPs that range quarter

Rick Neaton

ETH revenue on actual node, the at me in your the had PULP eFPGA still there Platform XXFDX today? you that work stated you that license for opportunities Zurich quarter is case Last

Brian Faith

and does it's watching ETH companies from and/or with is university from anticipate are that revenue And the intend just Zurich. not those, license those are to to It because it's themselves clarify other research a from developments working do very with they or entities we closely ETH commercialize yes, that ETH that but have do.

Rick Neaton

confident feel you XX% You higher this and that than bolstered growth told supporting the year. opportunities Is analysts still still the greater you're higher being from in QuickAI? XXXX revenue prior in and the in that revenue ASPs by versus

Brian Faith

of I the QuickAI we’re that helps that’s certainly because ASPs the bringing think one. solution, and that value it

time talked have, it’s you narrower Much plans back different ODM and do and much that we The we more OEMs set ago where last own a go from snapshot a interest. dynamic. wins second a and control we is, bigger products actually just, this with we again versus in a if very today, OEMs year and of their about launch year and you time engagements OEMs till have had

that’s So of this bolsters definitely the on our voices Amazon together, if By you way point an whole is combine that all you. everywhere yes, thoughts from and just going too other what thing the that. notion

powered? me would we here Man, are I asked be we goods white consumer wind think If say, be a today. year electronics that product would consumer so. a in last product, are you I would no. don't

next year. to breakout of evidence is me the more year all be add So going that just to these

Rick Neaton

is product Speaking that's in this platform, of involved of have going electronics this multiple sale product. correct? hear I and to manufacture you Did platform the OEMs that consumer a particular said the that

Brian Faith

that is think OEMs, for I yes.

Rick Neaton

at four Are Okay. XX? this January, And talked quarter of coming talk about displayed when design you four about possible last CES win. you those products in products on being XX of out these

Brian Faith

a It’s complicated ….

Rick Neaton

understand my question? you Did

Brian Faith

do that by with this I question. And your a Yes it’s complicated [NDA] we understand answer have one company. given

be a in I giving XX than for CES products go same into way. and more of I point. individual -- the clear at that will Stay complicated, of tuned are to more kind if specific at XX four It’s if don’t out would at too the want we it you point. be but we it without look this Just think much

Operator

At closing for this over to Brian I would back like Faith to remarks. call turn the

Brian Faith

LD on House Xrd The Main to York at in in Craig-Hallum RISC-V Discovery on Select Hilton Company Square Technology following China York at Times The We XXth. XXth. Clara, The Micro-Cap Corporate Chicago the York being the New Palmer in on investor Empire held and November One-on-One and Conference at being Xth. will Santa Sheraton China CA December quarter. XXXX New Hotel participating Micro Zhuhai, in The Event XXth. in held The being Steak Summit Capital Sunset Conference to our on at in House Xth events Annual Annual Xth the Hotel held The the demo November various Day showcasing A products Xth. New this Vegas on XXth will OEM Conference Luxe November wide held Group January suite ICCAD Benchmark of XXth. be at Alpha being in industry at November the Los XXth. Xth from CES at devices on be Angeles QuickLogic Access Las XXXX ROTH range December

Module We predictive We look will the forward QuickAI at for maintenance also demonstrate these you applications. to and events. audio seeing

scheduled Wednesday XXth participation conference Time. your February And good call PM for next Thank for at is X:XX bye. support. and you Our continued Pacific

Operator

thank call. gentlemen, and Ladies today's That concludes for the you participating in conference.

now may You wonderful a disconnect. day. have Everyone,

QuickLogic (QUIK) 7 Nov 182018 Q3 Earnings call transcript