QuickLogic Corporation

Ladies and gentlemen, good afternoon. At this time, I'd like to welcome everyone to QuickLogic Corporation's second quarter fiscal year 2022 earnings results conference call. As a reminder, today's call is being recorded for replay purposes through August 23rd, 2022. I would now like to turn the conference over to Mr. Jim Finucchi of Darrow Associates. Mr. Finucchi, please go ahead.

Thank you, Operator, and thanks to all of you for joining us. Our speakers today are Brian Faith, President and Chief Executive Officer, and Elias Nader, Senior Vice President and Chief Financial Officer. 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 production shipments, timing and market acceptance of its customers' products, schedule changes and production start dates that could impact the timing of shipments, the company's future evaluation systems, 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 recent filed periodic reports with the SEC. QuickLogic assumes no obligation to update any forward-looking statements or information which speak as of the 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 and QuickLogic may use these channels to comply with its disclosure obligations under Regulation FD. A copy of the prepared remarks made on today's call will be posted at QuickLogic's IR webpage shortly after the conclusion of today's earnings call. I would now like to turn the call over to Brian.

Thank you, Jim. Good afternoon, everyone, and thank you all for joining our second quarter fiscal 2020, excuse me, 2022 financial results conference call. Our business momentum continued in Q2 as we achieved our best bottom line performance since 2010. Moreover, we have seen an increase in our sales funnel and large design wins currently approaching $100 million. We expect the pace to accelerate in the coming quarters and years, further boosting both our near-term and long-term growth trajectory as we drive the company to profitability. This has all been enabled by being the first commercial entity to market with a robust and comprehensive platform that blends open source technology with our decades of product shipments and engineering know-how in the FPGA market. I believe a recent event marks a watershed moment for QuickLogic. As noted in the earnings released today, I am both honored and pleased to share that we have won by far our largest eFPGA-related contract to date, one that will start at approximately $7 million. The company's deliverables will be due over the course of 12 months. In addition, subject to completion of such deliverables and at the option of the customer, the total contract value could increase to tens of millions of dollars. While we are contractually prohibited from sharing customer names or end market details on this most recent win, this development demonstrates how eFPGA-related opportunities are turning into multi-year, substantially higher revenue design wins. We believe this is further proof that our strategy to develop eFPGA IP and related products will transform QuickLogic into a sustainably growing and profitable business for many years to come. Since July of last year, we have now closed firm EFPGA-related contracts approaching $16 million, with the aggregate potential approaching $100 million over time. There are several additional opportunities in our sales funnel that are expected to follow a similar path. starting as an eFPGA IP engagement and expanding to full FPGA-based device and or chiplet developments, with the intention of QuickLogic being the storefront for the device once it is completed. Our Astralis eFPGA IP generator has been a substantial contributor to this pipeline of new opportunities. Companies of all sizes, including some very large and recognizable names, are coming to QuickLogic because we can define and deliver customized eFPGA IP and or devices in a highly automated way. Our standard cell design approach allows QuickLogic engineers to generate custom eFPGA IP in a matter of months, giving our customers a fast time to IP delivery and providing QuickLogic tremendous operating leverage from our R&D resources. The breadth of our active EFPGA customer engagements spans the world's largest semiconductor foundries, including TSMC, Global Foundries, Samsung, UMC, and Skywater Technologies. Now, moving to our Sensible business. Sensible is having its best year ever. In our May earnings call, we shared that Sensible signed their first six-digit win, and the pipeline of opportunities is growing. In the June quarter, We saw a doubling of six-digit opportunities, including a growing number of Fortune 500 companies. Our current expectation is we will close at least one of these deals by the next earnings call in November. Driving the SunSumo engine is an expanding ecosystem of integrators. SunSumo recently closed three new system integrators in Asia to add to the already publicly announced deal with Direct Insights. We are looking for these new additions to drive more six-digit revenue deals in the first year of representing the sensible products. Since the start of the year, we have been asked to offer additional commentary on the emerging chiplets markets, and specifically our chiplets program. Chiplets have been steadily taking market share from more traditional monolithic semiconductor devices. For manufacturers, using a chiplet-based approach not only creates flexibility, but helps enhance yields and reduce costs as each triplet component has a smaller die size and hence higher yield than would a larger monolithic device encompassing all of the same combined functionality. That is why our June announcement with Etopos is so significant. We provide the eFPGA technology, and they provide the special high-performance, low-power interconnect that's critical for many of the applications our customers have in mind. Our current plan is to start with eFPGA-based triplet templates and then move forward with a known-good-die approach commensurate with customer demand. The chiplet market is expected to grow significantly over the next decade. Industry research firm Transparency Market Research recently noted that the chiplet market is expected to exceed $47 billion by 2031, representing a CAGR exceeding 40%. We are under evaluation with lead customers to see how we might architect a chiplet that can be reused across multiple customers. I want to quickly touch on some of the other areas of our business. DisplayBridge product sales and design ends remain strong as we benefit from the continued global supply chain issues. We expect demand to remain strong into 2023 and have inventory to meet customer needs. In our mobile phone business, We believe we are being designed into several new models of phones that will ship well into 2024, giving us a good long-term visibility. In the near term, though, very muted consumer spending in recent months is negatively impacting our primary customer. Given the macro factors, including ongoing supply chain issues, we believe the second half will remain weak for our mobile phone business, with Q3 being the low point in demand. Finally, In our mature product segment, we are starting to see some stabilization in bookings for this quarter and the balance of this year. However, without good clarity on the macro economy, we currently believe mature revenue will be slightly down from 2021. Before turning the call to Elias, I want to provide our revenue outlook for Q3 and offer a look into Q4. Over the last two years, we have made significant progress building our software and IP-related business. During this transitionary period to a more software and IP-centric company, I have noted that from time to time there could be some lumpiness in our revenue recognition due to the timing of milestones in these agreements or delays in start dates. For Q3 in particular, we had originally expected a $7 million agreement I previously mentioned to start earlier in the third quarter. However, we were recently informed the project start date has been pushed to later this quarter. This push out in revenue coupled with a softening smartphone sales environment has caused us to reduce expectations for Q3 revenue by approximately $1.8 million. We expect a portion of this revenue to be realized in Q4 and into the first half of 2023. As a result, our current expectation is for revenue in Q3 to be approximately $3.4 million plus or minus 10%, which on a rolling 12-month basis still puts us in line with our targets since it reflects the impact of timing in terms of signing new opportunities. I want to be very clear. In winning the large contract I mentioned earlier, I am convinced the third quarter revenue decrease is a mere blip in our growth trajectory related to the start date of this new large contract and is not indicative of any barriers to continued growth and profitability. Even with the shift in the start date of this large contract and the smartphone weakness, We are on pace to increase fiscal 2022 revenue approximately 35% of our fiscal 2021. To further support our confidence in the business, the early outlook for Q4 is shaping up nicely. With this fiscal year revenue outlook and with current gross margin and operating expense levels, I believe we have a very good chance of reporting profitability in Q4. Let me now turn the call over to Elias for a review of the financial results. Elias, please go ahead.