QuickLogic Corporation

Ladies and gentlemen, good afternoon. At this time, I'd like to welcome everyone to QuickLogic Corporation's first quarter fiscal year 2021 earnings results conference call. As a reminder, today's call is being recorded for replay purposes through May 25th, 2021. I would now like to turn the conference over to Mr. Jim Finucchi of Darrow Associates. Mr. Finucchi, please go ahead.

Thank you, Hillary, and thanks to all of you for joining us. Our speakers today are Brian Faith, President and Chief Executive Officer of and Anthony Contos, Interim Chief Accounting Officer. The company continues to follow social distancing practices, and management is again hosting this call from different locations today. As a reminder, some of the comments QuickLogic makes today are forward-looking statements that involve risks and uncertainties, including but not limited to stated expectations relating to revenue from new and mature products, statements pertaining to QuickLogic's future stock performance design activity and its ability to convert new design opportunities into into production shipments, timing and market acceptance of its customers' products, scheduled changes and projected production start dates that could impact the timing of shipments, the company's future evaluation systems of broadening the number of our ecosystem partners, and expected results in financial expectations for revenue, gross margin, operating expenses, profitability, and cash. Actual results or trends may differ materially from those discussed today. For more detailed discussions of the risks, uncertainties, and assumptions that could result in those differences, please refer to the risk factors discussed in QuickLogic's most recently filed periodic reports with the SEC. QuickLogic assumes no obligation to update any forward-looking statements or information which speak as of their respective dates of any new information or future events. In today's call, we will be reporting non-GAAP financial measures, You may refer to the earnings release we issued today for a detailed reconciliation of our GAAP to non-GAAP results and other financial statements. We have also posted an updated financial table on our IR webpage that provides current and historical non-GAAP data. Please note, QuickLogic uses its website, the company blog, corporate Twitter account, Facebook page, and LinkedIn page as channels of distribution of information about its business. Such information may be deemed material information or and QuickLogic may use these channels to comply with the disclosure obligations under Regulation FD. A copy of the prepared remarks made on today's call will be posted at QuickLogic's IR page shortly after the conclusion of today's earnings call. And with that, I would now like to turn the call over to Brian. Thank you, Jim.

Good afternoon, everyone, and thank you all for joining our first quarter fiscal 2021 financial results conference call. In the first quarter, we made continued progress on our transformation to a platform company that leverages artificial intelligence and open source software and hardware. I continue to believe this move to open source is a once in a multi-decade opportunity to disrupt the maturing FPGA market, and I will be articulating during this call the various strategies we are executing to capture that opportunity. In Q1, we introduced new products, added strategic partnerships, and we're invited to become a founding member of a new industry organization that will shape and define the FPGA industry based on open source technologies for years to come. The first quarter revenue, while within the guidance range we gave in February, was still held back due to ongoing COVID-related issues with certain customers and the broader capacity and supply chain issues in the semiconductor industry that have been echoed by many companies recently. Although we have seen lead times nearly triple, they are not to the extent as certain markets like automotive, where the supply chain is most constricted, with some lead times exceeding a year. There was also one six-figure IP licensing deal that we thought we would recognize in Q1. This revenue will be recognized in Q2. Through a combination of aggressive marketing efforts, increasing open source penetration and differentiated products, We have seen an order of magnitude increase in our pipeline of new business opportunities, many of which would start contributing revenue in 2021. This new activity reinforces my confidence that we will achieve our financial goals this year. Anthony will summarize our quarterly results in a few minutes. Before I get into my overview of the quarter, I want to provide an update on where we are with formalizing a strategic initiative with multiple partners. At the time of our February call, all signs pointed to one such initiative being funded by the end of February. With that funding in place, we would have been well on our way to an initial takeout later this quarter. Through a series of unforeseen changes, the funding of that initiative has not yet closed. So while we have a signed Memorandum of Understanding, or MOU, we await the funding piece, which we currently believe could happen before the end of summer. One of the positive outcomes of this initiative is that we have clearly established QuickLogic as the leader in open source FPGA technology. That recognition has resulted in multiple RFPs and RFQs totaling tens of millions of dollars in the last six weeks alone, many of which are with well-known entities. If we are successful with these opportunities, it could lead to accelerated financial performance in the second half of this year. While we can't predict how many of these proposals will be accepted, I wanted to share the information as another proof point to our growing pipeline of business from our transformed business model. Turning now to the first quarter, we made several announcements that I wanted to expand upon. In February, we announced the availability of an Amazon-qualified reference design that empowers OEMs and ODMs to evaluate and develop their own smart, curable products quickly and easily. This kit integrates the Alexa voice-initiated close talk experience, enabling a broad set of battery-powered applications to communicate directly with Alexa for a multitude of use cases. For those who have followed QuickLogic for some time, you know this was a voice-activated project we had been working on for over a year. The process took longer than we had initially expected, mainly due to COVID-related issues which affected engineering integrations as well. Related to our open source initiative, in March, we launched a new development that manufactured and sold by SparkFun, a popular online retailer of electronic kits and components. The launch was done exclusively on CrowdSupply, a well-known online distribution platform, and we have seen orders for more than 100 kits, which we expect to start shipping in early June. Expanding our addressable markets and presence in the marketplace has been a primary focus of our team since the start of our transformation. As the first programmable logic company to actively contribute to a fully open source FPGA platform, we have undertaken multiple strategic initiatives to broaden the served available market for our technology in a vastly more scalable way. In our February call, I mentioned how we were working with the University of Utah on ideas regarding how to integrate advanced Summit Connector layout automation techniques into our FPGA IP generator tool called Borealis. The initial results from this DARPA-funded research have exceeded our expectations. Not only has it led to a dramatic reduction in the time it takes us to target a new process node with our eFPGA technology, but it also brought us an invitation to join the DARPA Toolbox Initiative. This invitation represents a significant milestone as now our technology becomes broadly available to developers working on DARPA-related research projects, quite a large pool of potential customers, as you might imagine. We have significantly expanded our partner ecosystem since the beginning of the year. We now have working relationships with several leading companies and distributors in the AI and IoT space, including Silicon Labs and Google's TensorFlow group. and have a handful of other unannounced partnership activities with several worldwide semiconductor leaders. In addition, we signed a global distribution agreement with Mauser Electronics. With their global footprint and large stock of parts, working with Mauser makes it easier for people to buy and use our products. Due to confidentiality, I can't say what we are doing with each partner. However, I can share that many are working with QuickLogic and Sensible on AI-related activities with the goal of bringing solutions to market this year. Partnering with these third parties is about getting more Sensible seats into the market. And through the launch of our Sensible Community Edition, which we are targeting to end Q2 with around 500 new users of the toolkit, these multiple partnerships are beginning to blossom and will be vital to our future growth. While our history remains as a semiconductor company, as I have noted in recent calls, our open source initiatives, which will build our IP licensing revenue, will be the pathway to faster and more profitable growth. The software subscription revenue with IP licensing is very high margin business with a long tail. And while the revenue ramp is starting slowly, I expect it to pick up in the second half of our fiscal year. The FPGA platform, combined with the open source initiative, is increasingly viewed as a critical technology given both the scarcity value of the technology and continued geopolitical uncertainty. When combined with the talk from Washington of the need to onshore more semiconductor development, we believe that future trends are all favorable for QuickLogic. On the open source front, last week, we launched a new sensible open source initiative, which integrates with Google's TensorFlow Lite for microcontrollers and expands the sensible toolkit to the universe of AI developers through the TensorFlow neural networks. The growth of intelligent IoT endpoints is almost limitless. Edge AI alone will enable tens to hundreds of billions of units in the coming years. Implementation of edge inference applications in these resource-constrained devices is commonly referred to as tiny machine learning or tiny ML for short. Sensible is uniquely positioned to support this tiny ML approach. Through the Sensible open source initiative, we are addressing the key bottlenecks to AI deployment by streamlining the process of collecting sensor training data and making AI code understandable and supportable. Our quick feather initiative is taking flights. Since the start of 2021, we have received orders for close to 800 quick feather development kits and have sold close to 1,100 boards in the last year, a factor of likely 10x over the previous 10 years. The great start we have for the first part of the year in anticipation for an accelerated pace of dev kit sales over the remainder of the year makes me confident we will achieve our goal for 2021 to ship more than 2,000 dev kits, continuing the proliferation of our devices and software into the masses, leading to future device revenue. Recently, we announced QuickLogic was invited to become a founding member of the Open Source FPGA Foundation. This invitation is yet another endorsement of QuickLogic's leadership in being the first FPGA company to actively drive an open source initiative. The group includes semiconductor industry veterans, widely recognized academics in their field of study, as well as DARPA. This organization expands the market opportunities and is helping people making a buying decision quicker and easier. In fact, we are finding several new leads that are very well qualified. In looking at the other parts of our business, our smartphone revenue remains strong. While we did not add any new phone wins in Q1, Our smartphone customer has placed purchase orders through September, giving us nice backlog visibility into Q3. We are working on a few new programs with this customer, and I am confident we will see anywhere from two to four more models with our technology come to market over the course of this year. This would be in addition to the 10 devices currently using our technology. Lastly, in our mature segment, the COVID-19-related issues remain a challenge, especially for our largest mature product customer. Revenue from this segment was down sequentially, as expected, and there is no change to our outlook for mature product revenue, as we continue to expect it will be roughly flat with 2020. As you can tell, we are very busy with activities around our transformation. While each quarter will have its challenges, there are many positives coming through that are not yet showing up in our financial performance. I am confident this will change beginning in the second quarter. Before turning the call to Anthony, I want to personally thank the QuickLogic team for their tireless efforts as we work through the COVID-19 challenges. The conditions in our home county have changed dramatically for the better, and I am finally sensing we may be getting closer to the time when our team can return to the office on a more regular basis. With that, I will turn the call over to Anthony.

Thank you, Brian. With this being my first earnings call, as a way of introduction, I joined the company in early January and was appointed interim chief accounting officer on January 28 as part of the CFO transition announcement. Over the span of my 30-year career, I have worked in many senior and executive level accounting and finance roles, mostly in the technology industry. In my time at QuickLogic, I have been pleased with the depth and knowledge of the finance team and have appreciated the support Brian and the executive team have provided during this transition period. The company has a bright future, and I look forward to being part of the exciting opportunity. With that, I will now turn to our results. For the first quarter of fiscal 2021, revenue was 2.2 million. This compares with revenue of 2.5 million in the fourth quarter of 2020 and approximately 2.2 million in the first quarter of 2020. Within our Q1 revenue, sales of new products were approximately 1.1 million. This compares with $837,000 in Q4 and $486,000 in the first quarter of 2020. Our mature product revenue is approximately $1.2 million, compared with $1.7 million last quarter and $1.7 million in Q1 last year. In the first quarter, we had three customers who each accounted for 10% or more of our revenue. Non-GAAP gross margin in Q1 increased to 52.7 million, 7%, compared with 51.5 percent in the prior quarter and 52.2 percent in the same quarter of 2020. We continue to believe gross margin will get into the mid-60 percent range by the end of the year. Non-GAAP operating expenses for Q1 were approximately $3.5 million. This compares with $2.9 million in Q4 of 2020 and $4.1 million in the first quarter of last year. As we noted in our February earnings call, The higher OPEX numbers take into account the normal payroll tax reset at the beginning of the year as well as other customary expenses. Within our Q1 operating expenses, R&D was $1.7 million and SG&A was $1.8 million. This compares with R&D and SG&A of $1.6 and $1.3 million respectively last quarter and $2.3 million and $1.8 million respectively in Q1 last year. The net total for other income expenses and taxes in Q1 was a credit of $1.0 million, compared with a charge of $76,000 in Q4 and a charge of $103,000 in the first quarter of last year. As you may remember, in the last call, we had just received approval from the Small Business Administration for a PPP loan forgiveness application. As a result, we reclassified the $1.2 million of loan balance from a liability on the balance sheet to other gains on the P&L in the first quarter. Non-GAAP net loss was $1.3 million, or a loss of $0.12 per share, based on 11.3 million shares. This compares with a net loss of $1.7 million and $0.15 per share in the last quarter, and a net loss of $3.1 million, or $0.37 per share, in the first quarter of last year. Total cash at the end of Q1 was $20.9 million, compared with $22.7 million at the end of last quarter. The cash balance also includes the $15 million draw on the revolving line of credits, Now moving to our forecast for the second quarter of fiscal 2021, which will end on June 27, 2021. The revenue guidance for Q2 is $2.8 million plus or minus 15%. We believe total revenue will be comprised of approximately $1.3 million in new product revenues and $1.5 million of future of mature product revenue. Based on the expected revenue mix, non-GAAP gross margin for the quarter will be approximately 56% plus or minus 5%. Our non-GAAP operating expenses will be approximately $3.3 million plus or minus $300,000. At the midpoint of the Q2 range, R&D expenses should be approximately $1.7 and SG&A expenses of approximately $1.6 million. We continue to believe operating expenses will remain in this range through the remainder of the year. After interest expense, other income and taxes, We currently forecast our non-GAAP net loss will be approximately $1.8 million, or a net loss of $0.15 per share based on roughly 11.5 million shares outstanding. Most of the difference between our gap and our non-GAAP results is our stock-based compensation expense. We expect stock-based compensation to be in the range of $800,000 for the next few quarters. For the balance sheet, in Q2, we expect CAAT's usage will be in the range of $1.8 million to $2.2 million. After the second quarter, cash usage should decline over the course of 2021 due to expected improvements in both revenue and gross margin. With that, let me now turn the call back over to Brian for his closing remarks.

Thank you, Anthony. In February, Olaf Kingren, Director of the Free and Open Source Silicon, or FOSI Foundation, and a well-known advocate of open source tool flows, published his 2020 Year in Review. In that piece, he highlighted our proactive open source efforts, noting that we are the FPGA company that will go down in the annals of history for being the first to do open source. This kind of recognition from an industry leader is helping expand QuickLogic's brand in the fast-growing open source ecosystem. I could not be more excited about the prospects for QuickLogic. The number of opportunities in new and growing markets is better than we had anticipated. We believe there is a clear path to achieve many of the business and financial objectives I have talked about, and now feel stronger than ever that we control our own destiny. I would not have been able to say that a year ago. After a slower than expected start in the first half of fiscal 2021, we believe the back half of the year will be strong and should lead us to meeting our financial objectives for the year. In closing, I would again like to thank our many stakeholders, including our customers, partners, and QuickLogic team members for their continued support. That completes our prepared remarks. Operator, I would now like to open the call for questions.

At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question is from Suji Da Silva of Roth Capital Markets.

Hi, Brian. Hi, Brian. And Anthony, welcome to the call. Best of luck in the new role. So just a quick housekeeping question first. I know you guided the cash burn, but what was the cash burn in 1Q? And is the line of credit fully drawn, just to understand your funding position?

Yes. So the $50 million was fully drawn at the end of the quarter. And our overall cash position then was about $5.2 million. $9 million without debt freeze. Does that answer your question?

Yeah, Anthony, the burn in the first quarter versus the guidance?

Yeah, the excess burn related to the guidance was really primarily related to employer and employee taxes related to RSUs. That was not forecasted properly. Basically, the company has always used a withhold to pay as opposed to a sell-to-cover. So we have actually moved to a sell-to-cover going forward to make our forecasted results a lot more predictable.

Okay. And then maybe, Brian, I know there was a push-out of one of the IP deals. Can you talk about the size of the IP revenue opportunity in 21? Because it sounds like it could come on fast. I just want to get a sense of how much it could contribute to a 21 revenue forecast.

Yeah, it's a good question, Suji. So the one that we talked about moving from Q1 to Q2 is low six-figure IP license. It will fully get recognized this quarter. But for the balance of the year, with these big deals that we're talking about in play right now, this could be well over a million dollars in IP deals for the balance of this year. So I think, again, it just sort of underscores that there's scarcity value to programmable logic. It's very interesting for people. to integrate, and we're seeing the value of that increase now that we've moved to this new way of doing things. So I think it could be quite large for the balance of the year.

Okay. And a couple of questions. I'll try to make these quick on the open source and the initial, but they're all interesting to me, I think. First of all, when you said FPGA making it more competitive in the U.S., all the FPGA companies are domiciled in the U.S., but did you mean actually manufactured in the U.S.? Was that what you were talking about, Brian?

Well, it wasn't specific to FPGA technology, but it was more a general thought that semiconductors themselves sort of have this bright light shine on them now because of the, you see all these companies, their manufacturing lines are going down because of the lack of capacity. So there is more of a movement from Washington to invest in onshore semiconductor development. That's one. And we're talking about, you know, tens of billions of dollars for that. The second is that there's a lot of additional research that is being funded through DARPA and for a blend of semiconductor technology that's either onshore and or with open source to make that a more scalable technology for people to adopt in the U.S. So you couple those together and the fact that we have all of this deep domain expertise and programmable logic that dates back three decades, that's where I was trying to articulate. I think there's a really good opportunity in front of us here to capitalize on all those things. It's sort of a confluence of events, if you will.

Okay. And the DARPA toolbox specifically, are you aware that are you the only FPGA technology they are looking at now, or are there multiple FPGA technologies being evaluated just to understand your exclusivity there?

Well, so there's – I don't think DARPA wants anything to be exclusive because they want choice and option for all of the DARPA performers or people that do DARPA-based projects. So if you go to the DARPA toolbox page, you'll see QuickLogic from an eFPGA and FPGA point of view. You'll see one of our IP competitors from an eFPGA-only point of view. And then you'll see one of the other mid-sized discrete FPGA companies there for FPGA user IP or reference design IP. I think what makes us unique and stands out amongst those other two, A, we have both options under one roof. So we can go device. We can pivot people to IP when they want to integrate into their ASIC. And so as far as I know, we're the only – one of those three that offers those choices and how people can actually buy and integrate and use the technology. The second thing I'll say is that of all those companies, we're the only ones that are still actively embracing and contributing to the open source initiatives around FPGA technology. Those other ones are really closed proprietary systems. And so anything that's in the open source domain that supports them is largely from the community reverse engineering and, and putting support into the tools. But as you know, Generally, companies are not going to commit products to things that are reverse engineered and sitting on GitHub. They're going to be going with people that have staying power and actually support their tools like us. So that's how we're different, but still excited to be part of the initiative, even if there are a couple other people there.

Okay, and the last question, I'll step out of line with this. The open source initiative, there's a lot to talk about in the next few quarters, I'm sure, but the notion, I know you can talk specifically about your partners and what you're doing, but someone like Mouser, for example, and Adisti in general as a distribution channel, I don't think they're just selling your products. I think they're trying to probably evangelize it with kits and so forth. Maybe you can help us see how a distributor with that kind of reach like Mouser can help your open source initiative just to give us some flavor of how this is going to play out.

Yeah, so with Mouser, it's about worldwide reach and making it very easy for people to start getting the technology, kitting things together with different boards to emulate proofs of concepts for a customer and then getting AI software in it and running with it. So Mouser, I think, is great in that sense. We do have other large distributors around the world like Future. Future Electronics actually is running all these AI seminars for their customers and including us as part of that. So you're right. They're doing more than just stocking parts. They're actually proactively setting up sessions with engineers that they have relationships with to promote the technology to them. And the same is true with some of the regional distributors in Asia also. So, yeah, they're definitely much more than just the fulfillment side of distribution that people classically – associate with semiconductors distribution, and they're much more supporting on the design side and the promotion side.

Thanks. That's it for me. Thanks, Anthony. Thanks, Brian.

Thanks, Suji.

Thank you.

As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for additional questions. Our next question is from Martin Yang of Oppenheimer. Please state your question.

Hi, Brent. Welcome, Anthony. My question is on the development kit, it seems like the traction is pretty good. Is there a way for you to follow up with those individual developers and then form a direct relationship with them to see where they are with either Quick Feather or some of the newer development boards?

Yeah, hey, Martin, I can take that question. Absolutely. It's not a black box when a board actually sells through to a developer, an engineer. We are shared information that's all above board, of course, from our distributors. With that, contact information, name, company, all that stuff. So we can and do follow up, and we try to prioritize who we follow up on. Obviously, some of those, you know, more than 1,000 are going to be people kicking the tires or students, and we don't prioritize those, but we do especially prioritize large Fortune 500 companies, of which some of these are four. And so we are following up in that sense. By the way, there's also not just distributors. We are still selling on our website. In some cases, people just prefer to buy direct from the OEM, and so that makes it pretty easy to follow up as well.

Got it. And as a fellow on that, can you maybe tell if there's more traffic directed to your direct channels versus some of the distributors?

For the dev kits specifically?

Yeah. Is there any trend where more developers are attracted directly to your website as opposed to getting the boards from third-party sources?

I would actually say that Once we've had these multiple launches at different distributors, we are getting more sell-through through the distributors to customers now. And I think generally speaking, they already have accounts with these distributors, so it's pretty easy for them to just tack on another board to an existing account. So we have seen quite a bit more. I would say maybe 90% of board sales now go through distributors than direct to QuickLogic. But again – It doesn't really matter to us because as long as we can find out who's bought them and we have the opportunity to follow up, that's fine for us.

Got it. My final question is on your strategic initiatives of which you have signed the MOU with. And is there any milestones you have to achieve before the funding finally falls into place?

That's a great question. And the short answer is no, we don't have any milestones. They have to have the pulling together of that to get the funding to us. So I think from our standpoint, we've tidied everything up. And like I said in the script, the last six weeks have been pretty crazy in terms of RFPs and RFQs and getting all these proposals back out. So at this point, I think everything that we're obligated to do for those has been done. And now we're in the wait and see mode to see when these things are actually going to close.

Got it. Thank you. You're welcome.

Our next question is from Richard Shannon of Craig Hallam. Please state your question.

Well, hi, Brian, and welcome, Anthony. I look forward to working with you. I'm going to follow up on the last question or topic, your last question on these strategic initiatives. Brian, you made some interesting statements for which I guess I'd love to And I'm probably not going to ask a very detailed question here, but when you talk about multiple RFPs and RFQs totaling tens of millions of dollars coming through in the last five weeks, I guess I'd love to learn a little bit more about this. You know, what are these related to? Can you characterize the companies from which you are receiving these? And what's kind of the process going forward? You know, assuming the funding gets closed here, what would happen after that?

So at a highest level, I would characterize nearly all of these are very well-known entities, if I were to say their name. About half are semiconductor companies, half are system companies, OEMs, large OEMs. And if you double-click further, there's a mix of device opportunity and a high degree of IP license and service revenue as part of that. So the nice thing is it's really blended. Almost all of it is based on our open source initiatives, and I think that gives us a very good competitive edge in terms of how we've responded to these different quotes. And I also mentioned in the script, by the way, it was six weeks, not five, the timeframe for revenue on some of these is actually 2021, so not 2022. And the last thing I'll add is that several of these have upfront cash revenues. obligations as well. So I think from a financial point of view, that's also comforting to know that there should be some upfront cash for these as well.

Okay. Very interesting. We'll look forward to hearing more about that in future weeks and quarters here. Let's see here. Moving on, just a quick question on the guidance here for the current quarter. Just based on the little bit higher gross margin, I'm assuming there's a little bit higher component of licensing in there. I guess I want to understand where that's coming from. Is that the one you're expecting to sign on the first quarter that's moved over to the second? And I guess part of that question is that I think in the last call you talked about potentially getting a full license for Embedded FPGA signed in the first half of this year, and it seems like you're getting one push from the first or the second quarter that wouldn't necessarily happen. So I just want to make sure I know what's being included in there.

Yeah, so for Q2, definitely that IP license is part of that gross margin uplift. There's also some nice gross margin mature product in this quarter that are contributing to that, and then some sensible as well that obviously has high gross margin. The first license for the first half is definitely the one that we're talking about. There's several other ones now in flight, I would say, based on these different RFPs and RFQs that we've responded to.

Okay, that's helpful. Maybe just a couple other quick questions for me. Obviously, your phone customer is a pretty important contributor here, and you talk about some more wins, maybe two to four ramping the rest of the year. Would that be fair to say, Brian, that if we were to think about seasonality, obviously we're certainly less than two years into this customer, is it fair to say that you're expecting the second half of the year to be better than the first half just based on their cadence of wins and ramps so far?

Yeah, I think that's a good way to look at it, Richard. This particular customer, especially with so many of these handsets shipping into Japan market itself, they typically have two times per year that they do major launches, spring and fall. So a lot of the uplift you're seeing right now is, and actually in Q1 was because of the spring launch preparation. So yeah, I expect if we do get into these two to four models, like what I was saying in the prepared remarks, that we would also see a similar effect in the second half, which by the way, I think that's one of the reasons why you're seeing, like I said on the call, we've already got backlog through September, and they're really working with us in partnership with our longer lead times that we have to accommodate right now from the supply chain side, because they really want to make sure that they have product or inventory of our devices on hand to support their launch and their ramps.

Okay, that's helpful. Last question for me, just on the The financial outlook for this year, last quarter, you talked about your kind of goals here in terms of sales being mid-teens. But I know Anthony reiterated your gross margins in the 60s. We just want to make sure the mid-teen sales is still a number that you still believe is achievable.

Yes, that's correct.

Okay, perfect. Just want to hear that. That is all from you, Brian. Thank you.

Thanks, Richard.

Our next question is from Rick Deaton of River Shore Investment Research. Please state your question.

Thank you. Hi, Brian. Hi, Anthony. I wanted to clarify something that maybe I didn't correctly understand. The strategic initiative that you talked about that will hopefully close by the end of summer now, is that related to all the RFPs and RFQs? that you mentioned you've had to deal with over the last several weeks?

No, that original one we talked about in February is separate from the new wave that we got from a lot of other entities besides that one that we responded to that are the tens of millions of dollars of magnitude. So that's why I was trying to convey my optimism and excitement around just this whole recognition now that we're a big player in this open source programmable logic area, because that's really one of the driving factors behind all these incoming RFPs and RFQs. Again, they were in addition to the one that we were talking about in the February call.

Okay, thanks. Are the distributors driving these RFPs and RFQs, or are these coming directly? No, no, no. These are direct? Okay.

Generally speaking, yes. Semiconductor distributors are very solid. Their swim lane is sort of the, you know, sub $1 million per year type opportunity. If it creeps up into the several hundred thousand to a million, we make sure we get our direct folks involved. But I can assure you that all of these ones that were part of this group of RFPs and RFQs that I was articulating are being handled by QuickLogic personnel directly. Of course, we'll probably have to fulfill some of these through distributors, but At that point, it will be a fulfillment. There won't be a design one because we'll take care of the part ourselves.

Okay. Thanks a lot, Brian. I appreciate it. Thanks, Rick.

We have reached the end of the question and answer session. I will now turn the call back over to Brian Faith for closing remarks.

Well, thank you, everybody, for participating in today's call and continued support. We look forward to speaking with you again when we participate in upcoming investor events and again when we report our second quarter results in August. Have a good day. Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.