- Earnings call transcript Q3 2022

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Operator

Greetings. Welcome to QuickLogic Corp’s Third Quarter 2022 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Alison Ziegler, Investor Relations. Thank you.

You may begin.

Alison Ziegler

to you thanks joining and you, all for of us. Thank

Officer. President today Vice Executive Financial are speakers and President Brian Chief Senior Our Nader, Faith, Chief Elias Officer; and and

acceptance QuickLogic expectations differ new of performance, As our timing of production products; to could makes materially revenue, expenses, operating convert for involve a ability may statements opportunities systems; its and cash. of customers' but relating pertaining stated including, design today. QuickLogic's production its dates the number financial and shipments; limited the ecosystem uncertainties, of products; gross results margin, to new partners; to reminder, the revenue risks evaluation schedule impact today or forward-looking from activity and statements into future some trends and are broadening design and start that from profitability to changes expectations and shipments; stock market expected Actual discussed not company's the future those comments and and mature that results timing

QuickLogic periodic discussions with more in and result could QuickLogic’s that factors be assumes will as reporting no information, please today’s non-GAAP or information risks, update recently measures. dates statements of the those the differences, most new filed For assumptions in we which refer SEC. discussed uncertainties the to of forward-looking detailed risk financial reports of or obligation to any speak any respective In the future call, events.

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

conclusion about account, page, page QuickLogic business. material its that on Such provides to may remarks of corporate deemed use information, comply Regulation these blog, on table today’s with would to over data. copy website, disclosure information and prepared We page I obligations Brian. the web information as its A distribution current call. be web Please turn page updated to QuickLogic’s company have non-GAAP also today’s financial posted an of like ahead, of may LinkedIn Facebook IR posted Brian. and Go be and the channels at uses call after historical FD. earnings note, our Twitter made IR under of the QuickLogic call now the will channels its shortly

Brian Faith

Thank conference third thank you, call. everyone, of Alison. Good and all you joining afternoon, financial XXXX for results our fiscal quarter

hardened September the a development we The Our revenue strategic and the significant government of contributor second officially call $X.X new inline million on new third the our $X.X quarter's our XXth. announced radiation midpoint for referenced million with quarter's to expected on be was of in revenue of first a Included contract expectations U.S. provided is FPGA call. quarter right associated last with to this this is on program technology the revenue. that quarter conference month

Given that little this it me far what contract to-date, by means a spend time QuickLogic. is our for let largest reviewing

hardened a the contractor, contract a First, SkyWater four of XX and prime due of realized performance today as years. options successful approximately base contract for In We is so dollars size primarily chip, $X.X and will once the course previous the programmable Semiconductor of have at over QuickLogic annually, for million market announcement, will million, Technologies, eFPGA served believe has several and to IP. contract of our allows becoming base the be government, our just our deliverables logic development of desire worth and would coming the intention the team shared the years. than one contemplates device strengths Solutions. become the which more radiation is collaborate a that million, Technologies And with available we offer in such calls, Everspin of it customers us, that, we the the QuickLogic U.S. act increase first as the is can I device of storefront, while Trusted completed. discretion saw substantially selling totaling the only over for Upon composed $XX the is with storefront contract for span of market months. the you been in the hundred the the

not for all capability to way recent a incorporate eFPGA new I and very as spectrum transforming full time device that from a to IP. device than These to I the am of wins will opportunities related is increase multi-year of that eFPGA requirements, design taped IP strategy sustainably related engagement growing of We details our is incorporates could to additional can or triplet million, couple tens path, full two design FPGA revenue for a the IP substantially I it into that and of that eFPGA total soon solutions in have starting represents we several further be an develop on expanding any eFPGA funnel we customer. revenue higher a QuickLogic device our dollars and and sales design have the to and in products years. and to potential sales and a specific offer developments. similar that Due have buy quarter chip a in our namely opportunities turning into IP $XX how profitable pleased are the based our designs business. want follow a to demonstrate of full another million believe proof eFPGA share to to the wins am out emphasize I allowed that to What starting share our first these wins other that, IP confidentiality in win, millions funnel XXX this

enabler and opportunities leverage comprehensive Australis resources. customer R&D main of highly of IP in months The eFPGA logic Samsung, which The product devices in source has a semiconductor GlobalFoundries, engagement first of our evolving advantage breadth programmable customized market. and/or market with spans the generator, the As of pipeline FPGA decades eFPGA open of blends way knowhow this QuickLogic company new established our and a can first quickly robust TSMC, QuickLogic, deliver and to automated technology shipments with world's active engineering the platform and a in UMC, this mover market. that our eFPGA from in IP including tremendous SkyWater largest foundries, matter providing Technologies. while define operating is

registered its revenue Now integrating is to a growing momentum the to A our value broad yet recognizes products by its ever who solution SensiML continues at interest. leading continues new microcontroller across industry was industry China over Semi delivering SensiML This of portal the QX. AI edge business, moving month, on with with customer AI address customers products. X ecosystem as innovative powered SensiML for The demand solution line its innovative year million and to IoT SensiML reaching leading its also with gain also electronics semiconductor in most influence SensiML quarter have award with SensiML and value company in award. best partner tier top voted own members recognized far product largest in to market.

events market devices traditional The share discussed center steadily to discussion next more a as grow taking last expected is market from chiplets, to quarter. chiplets several have chiplets have of in the XX%. billion noted and to been significantly exceeding the the exceed industry Industry semiconductor chiplets that market at potential time, quarter, monolithic XXXX, been past lead over is template. decade. by research define expected the research market $XX with to a discussions recently advanced firm past CAGR In an FPGA partners representing transparency chiplets and customers we Moving

some past on sales touch quickly other our Display continued will supply as from issues. I continued this global quarter benefit we business. Bridge the product chain Now areas ends design of and

needs. fund continue to designed We business, into XXXX. into believe expect demand and phones models into will have In mobile our we ship XXXX are we to to new meet of continue well that inventory customer being

months, recent With smartphone to consumer with the quarter to QX demand. will the our in being fourth sales muted low customer our very point weak we believe spending be continue now in

mature demand which from see from factors decline XXXX. our quarter, revenue the as are result we as as current being much $XXX,XXX $X product sequential a XXXX segment, would mature in around fiscal million quarter prior by down forecasting we in macroeconomic impacting fiscal Finally,

some this to eFPGA from be are year. IP integral products continue part profile, even starting wins. come stabilization see of will bookings our will mature related an product Fortunately, Mature the for revenue of though primarily and growth balance to design we our

Before turning QX into Elias, call for revenue I to the want provide outlook to peak and a our offer XXXX.

related IP years, have our in two significant last business. software the Over progress made building we

of fiscal margin approximately looking even approximately XXXX. revenue revenue September, revenue contracts, is again year, XXXX While get realized $X.X our With believe reporting of our the agreement, early slightly our and be on first XX% we revenue we for expected our forecast we trajectory newly current is decline is to and due assuming we And product funnel, close us we we smartphone see our puts aggregate XXXX. quarter This and gross non-GAAP will every around expectation business initial in significant and continue levels, a later half to in for growth be this to start some shaping basis executed in and seeing a QX did and operating our to over XXXX lumpiness outlook the pace this into minus a or chance sequential profitability recognition to non-GAAP in of in in us, saw expense date on incorporates break a of revenue, or approximately million contribution up to million good pause mature nicely. in With profitability plus believe of I $XXX,XXX. QX our increase $X.X sales XX% have behind QX at XXXX, an projecting XX%. growth segment current fiscal next are quarter. and our This of for

the Let me Elias, ahead. please Elias, the financial to now over of results. review turn who’ll go call

Elias Nader

you, everyone. Thank afternoon, good and Brian,

$X.X later with with in other QX was FPGA full plus million contribution technology. quarter of performance of reflecting expectations for in radiation net strategic million, line in the of of hardened X.X We contract $X.X revenue than new our with our a reported loss growth start this expected from large contract date non-GAAP out million a Our areas.

believe on again QX in XXXX. continue we basis get a profitability close of reporting non-GAAP We breakeven to will to

This quarter. compares the third was Let quarter million. to of turn XXXX. with last $X.X in $X.X me quarter for Revenue third QX review in $X.X million now million of the at the the results

more X.X services, revenue. of margin our compared non-GAAP last QX that revenue, contract prior year. Similar $X.X also in was a anticipated. in of in $X.X and softening in quarter quarter, to XX.X% with same In In quarter third QX last million accounted margins $X.X the saw in quarter, last and million. QX The prior on revenue products XX.X% Within our of million pressure XXXX. the in has gross gross for compares the we million XX% smartphone the were was each with XX.X% as ago. professional quarter lower addition product specialized to costs sales the or tip increased to and five in the inclusive delayed revenue compared prepared the million that due associated This with IP to we of EFPG with sales his customer $X.X non-recurring approximately of new expenses QX, and a out Brian as startup, $X.X well tooling remarks. million customers Mature year referred is quarter had of quarter approximately

million certain were OpEx of Now $X.X of to the $XX.X approximately of in than quarter. that September investors. The per based $X.X quarter on QX. of or out, last with loss year to supported we per share compares expenses more Non-GAAP that forecast, we the XXXX. last due shares. the loss new the of million of approximately completed reclassification or in services. our $XX net support from in $X.XX design was million $X.XX compares raised was normalized anticipate Non-GAAP QX margins engineering rates XX.X million and ago. QX $XX.XXX $X.XX discussed quarter a related million in share IP compared of third million of was This a in professional returning IP Total quarter tape R&D lower our third cash to expenses mainly $X.X the market quarter $X.X to loss end to operating QX eFPGA expenses loss million and share million operating eFPGA $X.X by the for million. team in near was existing per $X.X This at investments fiscal private and have or net offset The net wins continued with a placement has prior

of utilization net related issues customers cash operations. timing from Additionally, higher to cash contributed receipts from to

quarter fourth XXXX. the to fiscal on Now guidance our moving X, end of January XXXX, for which will

million to matured mix, QX million and approximately minus As expected points. $X.X or million revenue Brian reasons is this Based be about discussed, revenue be XX% of products. to outlined. percentage guidance comprised $X.X minus for Revenue of products will margin approximately approximately XX% he mainly X $X.X the due non-GAAP plus the gross new for on or is quarter plus of

expect non-cash, operating $X.X non-GAAP non-GAAP difference we below we approximately per compensation XX.X on or be share net OpEx million between and composition will based $X.XX to million minus shares results be programs. $X related increases $XXX,XXX. the plus In believe range GAAP taxes $X.XX Our non-GAAP to expenses approximately XX%. in expenses. million would be to currently we $X.X net remain Longer-term, loss our $X.X and this other which After QX, million approximately to of interest expense, or The outstanding. forecast will loss and income stock-based roughly will support million new is occasionally

As will timing year a grant. during of our and the in reminder, stock-based movements there compensation may be on based the each the quarter vary it

that cash usage supporting to continued new discussed design wins be approximately midpoint, Moving expect investment sheet. balance at we to Even the $X the we have with to million.

are you with the now Brian profitability. stated we business for back and remarks. structure a earlier, that, let With closing operating the and As momentum driving listening overall our I'd wins to me we turn large new thank lean for say to company call in. the design in

Brian Faith

you, Elias. Thank

QX a fiscal exceeding technology and year of taped customer design current the of the of our customer, sustainable completes questions. million. the again, sensible strength would U.S. contract hard even remarks. open would into QuickLogic radiation $XXX I'm in As strategic thank sales the newly profitability. as I QuickLogic suppliers, all like and Government growth to on investors, resumes all support. revenue cusp XXXX and our funnel is more That most our teams for stakeholders, FPGA as for our call out confident of well like now I prepared including to, key continued the and on and Operator, their the

Operator

Our is Desilva Partners. [Operator Roth first Suji Capital with Instructions] question from

Suji Desilva

could maybe environment certainly. tough start I A you. Brian, with

for, based, the know be I an or bit would term, it the On little markets there a that would end be chiplets appealing are you form chiplets about, talked that's but verticals particular factor longer or the broad opportunity?

Brian Faith

Suji? End market segment question,

Suji Desilva

and Verticals for Yes. chiplets. market end

Brian Faith

looking would the and are markets ones getting is the at on cases right some right in one the are those two that that say computing ultimately, I one the performance now pull two we're now the but we're that different Use ones is for, side side. dominant funnel the between two high are for end defense the chiplets. on

Suji Desilva

of mature digging new got your the then products up. parts the And into guidance, goes moving decline. I The

million a case, be per versus a incremental the if is $X.X would linear Now quarter that one on month if XQ. basis, I'm the wondering government contract month is it million of per the

or FPGA recovering I'm rest the markets, does the those of additionally somewhat? there consumer display wondering are are processor licensing and growth the So

Brian Faith

You're in increase on the correct the government contract the quarter on roughly.

revenue we that's IP other sequentially, we in coming The would older still bucket. some we're new I mature, obviously other are eFPGA It's but some say, quarter. not related our back, FPGA then down classified other forecasting business, it's mature, forecasting as thing and product in see the

Suji Desilva

profitability, question at remaining can implied point? cash then you as flip to the talk guidance, and perhaps some And that'll for around guess and in burn the last Elias, I your about ‘XX

Elias Nader

we we things wins had But to into spend right POs for us to look to certain new Suji, when million going Yeah, the even contract money started these if hire definitely example, $X.X to on going. more are get I ‘XX people. the require

be million So think $X.X around XXXX range we're I when hits. $X.X going to that million to

So OpEx will be controlled, for sure.

Brian Faith

associated also in chip able jump back. go to previous here up, on just I tape circle jump the second some could a to in being them there's back the to Hey, to some revenue revenue -- customer devices out quarter. If provide that and for that question test with Suji,

Operator

Craig Hall Richard next is with Group. Capital from Our question Shannon

Richard Shannon

first this increase to application, and or in Brian, chip know last to included the guess was on the to. you're about talk out you tape customer say in is the FPGA the the wanted I I I going you're whether and/or related related the talked can referring to ask quarter? it you funnel relative funnel but about

Brian Faith

the It's a the inclusion that to device in asking? And question what funnel, related you're not discrete necessarily chiplet related. second is

Richard Shannon

Yes.

Brian Faith

recognizing we're The sales dollars, not for funnel. of the that IP of tens the that of the in and it's included I that the revenue part the funnel. millions chip So design mentioned now work, end the is earlier, definitely

Richard Shannon

XXs is margins, XX. than That some quarter what lower on seen have number of for you're Perfect. I'm or guiding plus than the last forgot add gross helpful of, this and lot because here. of assuming and half hopefully The so Okay. this or or the professional we older year XX lines ones, mix a about kind quarters some of even minus then guess newer think I the IP? sales ones, a services. question see in your or to we element a we being I the of gross XXs product with we'll the as chip different as see well. we're a is How margin in all these between addition of long-term eventually and And do

Elias Nader

of between So sure, XX% to services. most what pushing XX%, looking earning fact we of XX.X to that Furthermore, at why Richard by XX%, sales last range close mean, look goal the was at when the realizing been few terms very right? that low, guide of QX itself that to gross us professional XX. so it hit the for for -- when if were we're about right, lately at -- is professional But because The and mainly the these calls. that's what mainly is to press are seeing we to look you of in last XX%, close few very it's even of because of close win has company QX, we services XX%, XX%, I definitely are we when

I to me to is So anything closer I land. think where to XX want

don't put this see way. around it let's I us So XXs,

Brian Faith

as add me us customers devices are beginning a their for any stream royalty IP a start take let of higher gross initiatives, the to and very to component much just that, chips or And is carry in those to we start a these becomes of there integrate and that into storefront, on as services definitely going margin. selling

So I of some think the the still shipments. is the into we engagements term longer these as turning intact early model start of royalty service margin device

Richard Shannon

large questions last in Maybe talk if funnel seeing the Okay, near can to to the signed for $XX and you contract or last the is normal. term you're about you me, quarter if the or two maybe in seems of median Talked fair million Obviously, could something be about to see. kind expecting embedded pipeline next year, the quarter, we Maybe that. size that amount here. deal talk it perfect. one from or larger the going great somewhat FPGA than like or over about which last up Brian roughly

road? like government give stuff whether a here that to this a contract much bigger Just deal is more could size the truly see we where us down of sense

Brian Faith

as government I full XX. of talked think the Yes. in to a there scope we've be that don't that handful. contract I going be but are there's a as the lot mean, could of opportunities range, high about

going seven-digit the to for I think low us be is size the range like range. in more normal

million tag carry on extent like the maybe depending are then people typically straight or of $X types the $X and that the $X for right there north start But, will of So deals And million of going plus doing which, developments minus. opportunities. many minus on price that that. IP chip a of side. that's be we node say, plus other to million process is or those dollars to IP the nuances yes, Of probably around

Operator

Oppenheimer and is Our Yang proceed. Martin Company. from question with Please next

Martin Yang

you My Thank let's component higher new question you do product gross discussion. margin converge the gross first Hi, through good new you with margin expect revenues.? product as the products, after gross overall follow-up engineering a the or my you licensing afternoon. go with new eventually margin, -- associated is for we more question. costs -- the have on mature say, to When elements licensing margin taking some in

Elias Nader

Yes, Martin. ahead, Brian. Go

Brian Faith

what Are gross Let service margins me percent Is clarification ask the question, a the revenues that you are are total down of drop margin? gross at a of drag point revenue, not -- Martin. they do products? so asking a on as more like mature sort

Martin Yang

will that Do in margin? still is the impression -- mature converge products. that versus margin have my terms overall two gap will new think products Because eventually you the of gross segment

Brian Faith

for long-term revenue in fact, the will doing we gross product almost on takes is that for to actually significant the started get and royalty while revenue. get generate think IP the that shipments, mature software and It royalty to IP the product of products Well, that's point. the that exceed once pure flywheel new margin I point a gross to mature just because margins, at

other quite specific I market high. margins The of say associated that gross with these segment U.S. the that government we're doing devices are mean baseline, I'd some the that, is like thing

once that then taking so, will we does on when be start see that -- what even and And our storefront mature for some hopefully that products start we to margins were. gross the uplift beyond place, will

Martin Yang

intuition. my that's Yes, it. Got

of shorter time talk coming two longer or some you royalty time? start when when more about revenue to streams you years' devices that like shipping is So the in up, three or

Brian Faith

be Well, from shipments have to where device royalty bearing. they're they

probably is or XX past We license royalty so. have talked months between in time the to IP like start the about

that think is still true. I So

point early for last year, that late we to this or see licenses should year So did some year. we start royalties some earlier next at the

microcontroller. software royalties a IP talk can running about If existing for faster, chip a embedded then into an like you those not because second, It's being license. SensiML on start an they're

the people from should those those as stream production with go then AI start start sooner. models, to So royalty to

Operator

Neaton River [Operator question is next Rick from Our Investments. Instructions] Shore with

Rick Neaton

your revenue between In guidance? your IP your you how SaaS. us you in some it into product breakdown eFPGA and give last for that see down Can in down you color XX-Q, and broke breaking new QX QX hardware

Brian Faith

to the my think have it don't don't that head of although, at the level in was Rick. top breaking for QX the we're I I it guidance, down the service And actuals, particularly mentioned and high in I some quarter. Like customer had toolings for I tape -- exact I the out, related don't number. the don't the know to recall Elias but cost

Rick Neaton

In terms of revenue described XXX August? that the XX-Q can that of a breakdown funnel you those your you sales funnel million, rough in sales that between us categories at in give you three itemized

Brian Faith

line put recall Most too on exact breaking That's license the don't habit track the There into licenses would that I a a the services But services. that future. device value because service, generate and of gross device think call. customer -- I some lesser just lion's of for represented just shipments, not a is in best of component we're of just, very be and such storefront than revenue. funnel that the mentioned. in much revenue our the the royalty of high just sustainable by funnel going and that profit to I I'm And way bottom even royalty IP to out stream do get the but carries granularity decades it's And to by dollar delivering is We're IP three licensing for be to be the positions, and I in a not down the to of higher the level you could that every lot devices IP clear. that percentage, future, categories forth. into is think potentially that to share QuickLogic development is the funded of, company. To to be not to get we monetizing become trying services clear, the

Rick Neaton

you about? opportunities, You revenue we doing so particular of on spoke talked future. When the royalty you those to begin in mentioned specific items expect about in royalties a couple can

Brian Faith

I the think as development start in some about that in customer. have some earlier do see through XXXX year, the to some we'll talked with gone royalty of we last fact licenses

one our of chips those fact, In from IP one back customers some of test licenses. received just

So, quarters at the that but that probably that a royalty. means take would which from they're away starting to point see to volume, start actually in couple that's we

So some year. point next

Rick Neaton

looking looking are outlook revenue When you in general in more your business gave or in growth that at beyond? are in it flows and your for business your target seeing at you ‘XX of how developing, -- stability evolves you seasonality more elements in your as any forecasts, XX% outlook seeing in you year, is -- this are arising next of and

Brian Faith

Well, I these That definitely that visibility. stability see there's more a in nature. are term contracts more longer us lot coming from provide does

just not shot So it's revenue, on quarter. layering done revenue and one each

I think the the market that still has seasonality to it is smartphone market.

good But to more call, start like market, that's right, time get margin we little wins a that. a the on thing, which I is bit I actually going So of become longer thing. good a lesser as and into to gross to higher said will long as a we is percentage, of that see selling revenue, these in are lesser think,

I very yet on So, to seasonality it these much. really see new wins a don't

Operator

conference no the There comments. to would like are for back further to over questions. closing turn I Brian

Brian Faith

we Have day. to results like December, report again XXXX We Thank February. I'd in good a fourth and everybody quarter participate you forward thank our for look fiscal many events continued support. investor year today's in with upcoming you. and call November and to in we in when speaking for when your participating of and

Operator

This you. conference. conclude Thank does today's

disconnect may this lines thank and time, your You participation. at you for your

QuickLogic (QUIK) 16 Nov 222022 Q3 Earnings call transcript