QuickLogic Corporation

Ladies and gentlemen, good afternoon. At this time, I'd like to welcome everyone to QuickLogic Corporation's first quarter fiscal 2023 earnings results conference call. As a reminder, today's call is being recorded for replay purposes through May 23, 2023. I would like to now turn the conference over to Ms. Allison Ziegler of Doros Associates. Ms. Ziegler, 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 related 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 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 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 on QuickLogic's IR web page shortly after the conclusion of today's earnings call. I would now like to turn the call over to Brian. Go ahead, Brian.

Thank you, Allison. Good afternoon, everyone, and thank you all for joining our first quarter fiscal 2023 financial results conference call. I'd like to open today's call by sharing that given our progress in the first part of this year, I am even more bullish about 2023 today than when we spoke during our earnings call last quarter. We now expect to grow fiscal 2023 revenue by more than 30% over fiscal 2022. During Elias's prepared remarks, you will hear us provide our highest quarterly revenue guidance in recent history. And most importantly, my confidence is high that we will achieve positive non-GAAP operating income starting in the third quarter of 2023 as well as on an annual basis. With that opening, let's get into details. Q1 was in line with our expectations provided during our fourth quarter call. We reported revenue of $4.1 million, of which new product revenue was $3.1 million. Our results continue to be driven by our eFPGA IP-based products, including the RadHard program for the U.S. government, our continued shipments of smart connectivity and display products, and our Sensible AI software platform. Looking at some of the quarter's highlights, the top-tier semiconductor company that is integrating a private-label version of a Sensible-powered solution to address its own customers' demand across its broad microcontroller line of products is nearing their product launch. This private labeling of the Sensible toolkit provides significant revenue potential as a result of their large installed customer base and sales force. Our large strategic radiation-hardened FPGA contract for the U.S. government was our largest contributor to revenue in the quarter, and we remain positive on the next steps based upon continued successful performance of the base contract. The next steps are, of course, at the discretion of the U.S. government. As a reminder, this current contract is for the development of the prototype FPGA and does not include any of the possible device sales to the defense industrial base customers. We believe this market to be several hundred million dollars in size and our intent on capturing our share of it in the coming years. On the strength of our numerous EFPGA IP-based opportunities, our sales funnel grew to over $125 million, the largest in QuickLogic's history. Included in this number are deals for both EFPGA IP as well as bespoke or semi-custom device development that incorporates our EFPGA IP. These deals span numerous foundries, process technologies, and end markets. One of our unique strengths continues to be that we offer a full spectrum of solutions ranging from EFPGA IP all the way to full chip designs which incorporate that IP. As a reminder, we have multiple revenue sources within this product category. the primary ones being design services, IP licenses, royalties, and finally, device sales via our storefronts. Design services is how we monetize the R&D resources to develop our IP or bespoke devices for a customer, typically recognized as we do the engineering work. IP licenses are typically one-time events recognized with the delivery of our IP to a customer. Royalties are typically a small percentage of the final device ASP, recognizes our customers ship devices that include our IP. And finally, storefront simply means that our customer is buying a finished device from us. This could be because they lack the expertise in developing EFPGA enabled products, or it could be that they don't have the supply chain in place to produce and test the devices for volume production. We've had this supply chain in place for decades and can monetize this value with our customers. More than ever before, The fact that we have been a trusted and reliable supplier of FPGA devices is one of the many reasons why we are winning opportunities to be more than just an IP provider. In November of 2022, I shared that we had taped out a new device for a customer that incorporates our eFPGA IP. Revenue from the shipment of these test chips to our end customer will be recognized during this current fiscal quarter. Due to confidentiality requirements, I am not allowed to share any further details on the specific design wind, other than I believe it represents tens of millions of dollars in potential device revenue starting in a couple of years. As mentioned on our previous call, one of the contributors to our pipeline growth is a new government-focused EFPGA IP-based contract targeting a 12-netometer process node. This is our first contract for the 12-netometer process node, and we continue to believe there will be several more during this fiscal year. We did recognize revenue from this contract in Q1 and expect to recognize additional revenue throughout 2023. Moving to chiplets. We are seeing additional customer interest in chiplet-based opportunities, and we do expect to generate some revenue this fiscal year from either design services and or IP licensing that would fall into the chiplet category. Moving to our mobile phone business, we expect our customers' inventory digestion to continue through at least the current quarter of this year, However, we have been told that we are being designed into new models of phones that will ship well into 2024. Finally, we are forecasting flat revenue on our display bridge and mature product segments. While both will continue to contribute to gross margin uplift, they are still being impacted by well-publicized macroeconomic factors. Fortunately, our fiscal 2023 growth is forecasted to primarily come from EFPGA IP-related design wins. Before turning the call to Elias, I want to reiterate our revenue outlook for Q2 and the remainder of fiscal 2023. As discussed earlier in my prepared remarks, we have made significant progress in building our EFPGA IP-related and software businesses over the past two years. This groundwork has led to a diverse and growing pipeline, which supports our current expectation for revenue in Q2 to be approximately $5 million, plus or minus 10%. Our current forecast shows a sequential ramp in our revenue throughout the remainder of the year, making us confident we will now exceed the 30% annual revenue growth we discussed last quarter. We are also on track to report our best non-GAAP operating income in over 10 years, turning the corner to profitability starting in the third quarter of this year and on an annual basis as well. Let me now turn the call over to Elias for a review of the financial results. Elias, please go ahead.