QuickLogic Corporation

Greetings. Welcome to QuickLogic Corp. Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Allison Ziegler, Investor Relations. Thank you. You may begin.

Thank you. 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 involves 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 and 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 discussion 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 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 Reg FD. A copy of the prepared remarks made on today's call will be posted on QuickLogic's IR webpage shortly after the conclusion of today's earnings call. I'd now like to turn the call over to Brian. Go ahead, Brian.

Thank you, Alison. Good afternoon, everyone, and thank you all for joining our third quarter fiscal 2022 financial results conference call. Our third quarter revenue of $3.5 million was right in line with the midpoint of the expectations provided on our second quarter call. Included in this revenue is the first month associated with our new $6.9 million U.S. government contract for the development of a new strategic radiation hardened FPGA technology that we referenced on last quarter's conference call and officially announced on September 8th. The program is expected to be a significant contributor to this quarter's revenue. Given that this contract is by far our largest to date, let me spend a little time reviewing what it means for QuickLogic. First, as you saw in the announcement, the base contract is worth $6.9 million with deliverables due over the course of 12 months. QuickLogic will act as the prime contractor, a first for us, and we will collaborate with a team composed primarily of Skywater Technologies, Everspin Technologies, and Trusted Semiconductor Solutions. Upon successful performance of the base contract and at the discretion of the U.S. government, the contract allows for options totaling approximately $72 million, which would be realized over the span of four years. And while today the contract only contemplates the development of the chip, the desire and intention of QuickLogic is to become the storefront, selling the device once it has been completed. We believe the market size for radiation-hardened programmable logic is several hundred million dollars annually, so becoming the storefront for such a device would substantially increase our served available market in the coming years. In previous calls, I have shared that one of our strengths is that we can offer our customers more than just eFPGA IP. We have the capability to offer a full spectrum of solutions from eFPGA IP all the way to full chip designs that incorporate that IP. I am very pleased to share for the first time that we have taped out a new device that incorporates our eFPGA IP for a customer. Due to confidentiality requirements, I am not allowed to share any further details on the specific design win, other than I believe it represents tens of millions of dollars in potential device revenue starting in a couple of years. What I want to emphasize is that these two wins demonstrate how eFPGA-related opportunities can and are turning into multiyear, substantially higher revenue design wins. and we have several additional opportunities in our sales funnel that could follow a similar path, namely starting as an eFPGA IP engagement and expanding to full FPGA-based device and or chiplet developments. These recent design wins and the increase in our sales funnel by another $10 million this quarter to a total of $110 million are proof that our strategy to develop eFPGA IP and related products is transforming QuickLogic into a sustainably growing and soon-to-be profitable business. As the first programmable logic company to market with a robust and comprehensive platform that blends open-source technology with decades of product shipments and engineering know-how in the FPGA market, QuickLogic has established first-mover advantage in this quickly evolving market. The main enabler of this pipeline of new opportunities is our Astralis eFPGA IP generator. which can define and deliver customized eFPGA IP and or devices in a highly automated way in a matter of months while providing QuickLogic tremendous operating leverage from our R&D resources. The breadth of our active eFPGA customer engagement spans the world's largest semiconductor foundries, including TSMC, Global Foundries, Samsung, UMC, and Skywater Technologies. Now moving to our sensible business. Sunsimul continues to have its best year ever delivering its largest revenue quarter yet in Q3. Sunsimul's ecosystem continues to gain momentum with growing new customer and partner interest. A top tier semiconductor company is also integrating a Sunsimul powered solution to address its own customer's demand for AI at the IoT edge across its broad microcontroller line of products. This month, Sensible was also recognized by a leading electronics industry portal in China with over 1 million registered members who voted sensible solution with on semi as most innovative value product award. The award recognizes industry leading products with innovative value and far reaching influence in the AI market. Moving to chiplets, as discussed last time, chiplets have been steadily taking market share from more traditional monolithic semiconductor devices and have been a center of discussion at several industry events in the past quarter. 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%. In the past quarter, we advanced discussions with partners and potential lead customers to define an FPGA chiplet template. Now we will quickly touch on some other areas of our business. DisplayBridge product sales and design-ins continued this past quarter as we benefit from the continued global supply chain issues. We expect demand to continue into 2023 and have inventory to meet customer needs. In our mobile phone business, we continue to believe we are being designed into new models of phones that will ship well into 2024. With a very muted consumer spending in recent months, we believe our fourth quarter sales to our smartphone customer will continue to be weak, with Q4 now being the low point in demand. Finally, in our mature product segment, we are forecasting a sequential decline as we see macroeconomic factors impacting current quarter demand by as much as $400,000 from the prior quarter, which would result in fiscal 2022 mature revenue being down around $1 million from fiscal 2021. Fortunately, we are starting to see some stabilization and mature product bookings for the balance of this year. Mature products will continue to be an integral part of our revenue profile, even though our growth will primarily come from EFPGA IP-related design wins. Before turning the call to Elias, I want to provide our revenue outlook for Q4 and offer a peek into 2023. Over the last two years, we have made significant progress building our software and IP-related business. While we saw some lumpiness in our revenue recognition in Q3 due to a slightly later start date of our $6.9 million agreement, we did see initial revenue in September, and a significant contribution is expected to be realized in Q4 and into the first half of 2023. With this pause in our growth trajectory behind us, our current expectation is for revenue in Q4 to be approximately $4.3 million plus or minus 10%. This incorporates our forecast for an aggregate sequential decline in our smartphone business and mature product segment of around $600,000. This puts us on pace to increase fiscal 2022 revenue approximately 30% over fiscal 2021, and we continue to believe we will get close to reporting breakeven or profitability on a non-GAAP basis again this quarter. And looking at our sales funnel, the early outlook for 2023 is shaping up nicely. With our newly executed contracts, we are projecting revenue growth of approximately 40% next year. And assuming current gross margin and operating expense levels, I believe we have a good chance of seeing non-GAAP profitability in every quarter of 2023. Let me now turn the call over to Elias for a review of the financial results. Elias, please go ahead.