Q1 2020 Earnings Call
Ladies and gentlemen, good afternoon.
I'd like to welcome everyone to Quicklogic corporations first quarter fiscal year 2020 earnings results Conference call. As a reminder, today's call is being recorded for replay purposes through May 18 2020.
I would now let's turn the conference over to Mr., Jim Fanucchi as Darrow Associates. Mr. <unk>. Please go ahead.
Thank you operator, thanks to all of your for joining us our speakers today or Brian Faith, President Chief Executive Officer, Dr., Seuss <unk> Chief Financial Officer.
In line with social dispensing practices management is doing the 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 quicklogics future stock performance design activity and its ability to convert and design opportunities into production shipments.
Timing in market acceptance of customers products schedule changes in projected production start dates that could impact the timing of shipments the company's future evaluation systems broadening that number up our ecosystem partners had expected results of financial expectations for revenue gross margin operating expenses.
Stability and cash [laughter]. These statements should be considered in conjunction with the cautionary warnings that appear in Quicklogics FCC, Brian. Thanks for additional information. Please refer to the company's as he see filings posted on its website and the Fccs website.
Testers are cautioned that all forward looking statements in this call involve risks and uncertainties that future events may differ materially from the statements made.
More details of the risks uncertainties assumptions, please refer to those disgust under the heading risk factors and the most recent annual report on form 10-K. The most recent quarterly report on form 10-Q recent forms 8-K, and other documents we periodically filed with the FCC. These forward looking statements are made as of today.
This conference call and management undertakes no obligation to revise were publicly release any revisions to the forward looking statements in light of any new information or future events.
In today's call, we will be reporting non-GAAP financial measures.
Got it measures and should not be considered as a substitute for or superior to financials prepared in accordance with gap 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 in our IR web page that provides current and historical.
GAAP data.
Please note Quicklogic uses its website the company blog corporate Twitter account Facebook page and linked in pages channels of distribution of information about its products as planned financial and other announcements it's attendance at upcoming investor at industry conferences and other matters such information may be deemed material information.
Quicklogic may use these channels to comply with its disclosure obligations under regulation FD [noise].
A copy of their prepared remarks made on today's call will be posted a quick logics IR web page. Shortly after the conclusion of today's 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 first quarter fiscal 2020 financial results Conference call.
These are extraordinary times for all of us.
There is no question that cobot 19, as brought about a significantly more challenging business environment as well as increased uncertainty.
Our thoughts are with those directly affected by the pandemic and that many people fighting it on the front line.
Our company has been facing this human health crisis head on since day one.
Based on Silicon Valley, we were one of the initial areas. They went under shelter on place orders.
Since we do serve the U.S. military market our designation as an essential business has allowed us to continue limited operations during the crisis.
The remainder in vast majority of the Quicklogic team had been working remotely going on nine weeks now.
We will continue to do so until we are cleared to return to the office by the various government agencies.
While we continue to push ahead with the initiatives I discussed in our last call. We are seeing some covered 19 related impacts to our customers product introductions as many of them are also working under the more restrictive shelter in place orders.
Without the ability to work on site many of our customers engineering developments, the typically need to take place and alive with their own hardware has been delayed.
This has resulted in the push out of some projects ranging from a few weeks and months [noise].
With these covered 19 related changes. We currently believe fiscal 2020 revenue will be impacted by approximately 20% from what our expectations, where when we talked in February.
Well, there's still a great deal of uncertainty in the global economy, we're doing everything we can to maintain a path to profitability as soon as possible.
And despite this revenue impact we are still forecasting not only a sequential revenue increase for Q2 2020, but also stair step increases throughout the remainder of the year.
Another important point I want to stress is that our revenue mix for this year has also changed from the scenario we discussed during our February call.
While we do see the challenges I just discussed we have also seen new engagements brought on by the pandemic some of which May result in revenue. This year, there were not part of our previous forecast.
With that covert related backdrop, I want to turn to an update on the foundations I discussed in our last call that are serving as the pillars for future growth.
Share why I remain confident in our business potential and why I believe we will emerge from the current store a much stronger company than we were exiting 2019.
We continue to see three specific areas that will drive our annual revenue growth this year.
These include continued strengthen our mature products segment.
Expansion of our SSD products with several multinational Oems.
And continued growth in our sensible AI SaaS platform user base and yet PG IP initiative.
Within our mature segment, we have built a healthy and stable military business.
The push outs, we saw at the end of fiscal 2019 have largely been resolved and sales are mostly back on track.
The certainty in order flow, which is generally not subject to monthly or quarterly movement is one of the reasons, we continue to feel confident and achieving our profitability objective.
We currently believe mature product sales will now account for about half of our total revenue this year.
For our new product segment, which includes primarily our iOS as three associate products sensible AI SaaS revenue and ERP GA IP licensing we have been impacted by the covert outbreak.
Challenges brought on by the work from home guidelines, both locally and in our customers home regions abroad will dampen our growth outlook for my expectation is just a couple of months ago.
One of the biggest bottlenecks has been around the global supply chain, which as you know is geographically diverse.
The pandemic has had a varying impact depending on location.
Well, we are able to satisfy demand for certain mature products using our finished goods inventory in our own facility.
Limitations of assembly capacity have made it difficult to keep up with certain customer orders in the June quarter.
The good news is that our supply chain partners have done an amazing job to get back on track.
Logistics challenges from reduced capacity at printed circuit board companies and delays and shipping these different R&D facilities around the world have also introduced their own delays and in some cases that pushed back customer launches that include our product to later in the year.
These effects directly impacted the program, we have with a well known in fast growing streaming and smarttv provider.
When we talked in February and as recently as two weeks ago.
We were receiving weekly bill forecasts for an always on voice enabled remote control that would be bundled with our streaming player to be launch later this year.
Due to covert related issues that impacted their own engineering ability to meet product milestones.
The remote control will now be shipping without any always on voice recognition technology and therefore will not include our device.
This change is the primary reason for the reduction in our annual revenue outlook.
Despite this change the trend for greater adoption of wireless and hands free remote controls is accelerating opening the door for more opportunities to generate revenue and this developing market.
We already have additional remote control engagements moving forward with customers building prototype devices now with DSS three leveraging the same solution. We developed initially for the streaming content provider.
We're also engaging with several Oems and Odms to deploy the next generation of wireless earbuds.
While the largest player continues to dominate the market Amazon recently entered with our own customized solution.
Microsoft also recently announced that they were released their delayed surface ear buds as part of their refreshed surface product.
These alternatives along with several others are driving additional demand for here about type devices.
We are gaining acceptance with several lightbox OTI Atms for wireless earbuds and expect this market to contribute meaningful revenue later in 2020. After we achieve formal Amazon ABS certification and publication on their ABS dedicated webpage.
Let's now move to the smartphone market.
Our business at Kyocera is as strong as ever.
We are working closely on several new designs that have not yet seen any covered 19 related impact.
Hey, fourth phone was launched in Q1, bringing the total number using quit projects USS three platform to four including one feature phone.
Later in 2020, I still believe we could see as many as six pounds using our technology up from three at the beginning of the year.
And the consumer and industrial IR team market, our collaboration with both Flextronics and Infineon has deepening and remains an important foundation for us to build on with these multinational companies.
I previously mentioned that we are in the flexi no sensor fusion development kit from Flextronics, which includes a sensor fusion board featuring our iOS as three as the host processor along with Infinity on sensors.
Well the pandemic has delayed some of the marketing activities, our collective efforts with both flextronics and Infinity I will resume once every one returns to a more typical working situation.
Moving to our strategic initiative with a Mega cap platform company.
In March we announced the first deliverables from this initiative with a new open source hardware Aiotv development QED called quick feather.
Developed in conjunction with add micro a European technology Company quick feather includes an iOS as three and is designed to enable a next generation of low power machine learning capable aiotv devices.
Supports the 100% open source Zephyr real time operating system or artists and December flow open source MPG development tool.
Machine learning applications are being deployed at an amazing rate and we believe the new quick Feather board will further accelerate that trend.
Based on the initial interest from our March press release, we expect to ship hundreds of quick feather developments systems during Q2.
And while quick feather is a game changing for a quick logic in terms of the sheer number of engineers, we will engage and the total available market for our solutions. It is just the tip of the iceberg with respect to this initiative with the Mega cap company.
We're very excited to share that the full scope of the joint development with this Mega cap company and micro is nearly ready to go live.
We believe the massive reach this mega cap company will open up a user base 100 times larger than our current channel could on its own.
As such this initiative could drive at correspondingly higher revenue opportunity for the assess three and sensible AI software.
We plan to formally announce this effort and provide more detail via press release and blog posts in the coming weeks.
Moving to our ERP GA IP licensing business.
During Q2, we are happy to announce we signed a license agreement for our yet PJ technology for use in a low volume radiation hardened application.
Due to non disclosure agreements I can't elaborate on any detail beyond that.
However, I can say that we expect to generate a modest amount of revenue in the current quarter from that license agreement with royalties coming in future quarters.
Moreover, I believe this license as well as our soon to be announced initiative with the Mega cap company are helping lay the groundwork for stronger growth in our yet PA IP licensing strategy moving forward.
Let's now discuss our sensible AI SaaS business initiative.
Sounds somewhat close Q4 with dozens of customers up from just three going back to Q1 of last year.
As I pointed out in our last call. Most of these customers are using the evaluation version of the product.
Hi software as a neutral for the market in general and we are finding that during this ramp up period with many of our customers working from home. They have limited access to their own hardware and tools necessary to perform a full evaluation.
This is lengthening the time to convert customers to the full service platform.
While we work to convert more of our direct to customer engagements. We're also continuing to add several customers and the evaluation phase from our third party AMC you partners expanding our reach and further building our pipeline.
In February we announced support for NXP semiconductors, I doubt amex, our t. portfolio of crossover Microcontrollers using this on small analytics tool kit.
For a sensible NXP is I've got amex, our T. line fills an important segment between existing application processors and the ultra low power platforms already supported.
NXP customers can leverage this on smell platform to rapidly and easily build complex multi sensor recognition algorithms for advanced applications, such as predictive maintenance process control and structural health monitoring.
From a broader perspective, the sensible relationship with NXP and partnership with SP Micro now means we are working with two of the top microcontroller firms. This is an addition to relationships, we already announced with firms such as Nordic semiconductor.
We are also proud to share that sense. There has been invited to become part of a small consortium of companies whose goal is to tackle the cobot 19 pandemic head on through the use of AI technology.
There is a substantial amount of research taking place now to better predict if someone is symptomatic of cobot 19 through the application of low power sensors and AI software.
We are actively exploring how sense, most auto and L. technology can be applied in this area.
To assist in this effort, we will be publishing a website to crowd source datasets that can be used to build AI models initially targeting cost analysis.
Please see social media channels for both Quicklogic insensible, if youre interested in participating in the crowd sourcing of data.
In times of global crisis. It is important that we do our part by enabling easy access to our technology. So that it can be used to contribute to a solution.
As such we will be launching a special $99 trial version of our tool kit to make the power of the sensible AI platform available for those impacted during this pandemic, including the academic and research community.
Before turning the call over to Sue I want to reiterate that in spite of this period, where it seems circumstances evolved day by day I am confident we have the foundation in place to drive the company forward to profitability.
While our current revenue outlook for 2020 is being impacted by cobot. The aggressive proactive actions, we took to reduce cost before that pandemic and the anticipation that gross margins will improve through the year puts us in a position where revenue of around $6 million should get us to non-GAAP profitability.
I would now like to turn the call over to Sue for a discussion of our recent financial performance and for Q2 outlook. So.
Thank you, Brian good afternoon, and thanks to everyone for joining us.
Well the first quarter fiscal 2020 revenue was 2.2 million, which was within the guidance range we provided.
This compares with revenue of 3.2 million in the first quarter 2019.
Within our Q1 20 remedies.
Sales of new products were 540000 this compares with.
690000 into first quarter 2019.
Lower new product revenue from the prior year, what's it primarily due to the continued to decline in display bridge sales.
Our mature product revenue was 1.7 million.
Paired with a 2.5 in Q1 last year.
The decline from last year was due primarily to changes in demand from selected aerospace in avionics customers.
In the first quarter 2020, we had a wide customers, we check accounted for 10% or greater sales.
Non-GAAP gross margin in Q1 was 52.2 per cent compared with 62.8 person in the same quarter last year.
The lower gross margin Q1 was primarily due to product mix and some higher margin mature product Rodney will be in Q2.
We expect our gross margin to rebound did that low 60% range in the second quarter.
Non-GAAP operating expenses for Q1 was approximately 4.1 billion.
Well from 4.8 million in the first of the pointed out last year.
Changes are the result of several calls the containment measures net debt over the last year.
As I mentioned that you will recall last.
Last.
We expect to see operating expense declined to approximately 3.5 million starting in the second quarter 2020, resulting from that restructuring effort announced in January.
Within our Q1 operating expenses.
R&D was 2.3 million and SGN day, what's 1.8 million. This compares with R&D and SGN day of 2.6 million and 2.2 million respectively. In Q1 last year.
The net total other income expenses and taxes in Q1, well that charge.
Hi, good and $3000.
Compared with 233000, the credit in the first quarter last year.
As a reminder, in Q1 last year, we recorded a one time tax benefit of 282000 related to the intangibles that from the outlets Asian Sands.
Non-GAAP net loss in Q1 was 3.1 million or 37 cents per share.
This compares with net loss of a 2.5 million or 37 cents per share in the first quarter of last year.
The first year calculation for both periods reflect the one for 14 reverse stock split that what the effective last December.
Finally, the total cash at end of Q1 was 19 million compared with 21.6 million at the end of last quarter.
Included in Q1 cash usage.
Approximately 270000.
Spaces.
Cash these restructuring charges.
Our cash balance also include let's say accumulating through all from the revolving line of credit.
Now moving to our forecast for the second quarter fiscal 2020.
And on June 29.
Our revenue guidance for the second the quarter, it's 2.5 million plus or minus 10%.
I believe total revenue will be comprised smelter approximately 1.1.
New product revenue and 1.4 million of mature product Robyn.
Due to a more favorable product mix, including the radiation hardened MTG IPO I says, we should see non-GAAP gross margin Q2, Q, approximately 61% plus or minus 3%.
We're forecasting that total non-GAAP operating expenses while decline.
Approximately 3.5 million plus or minus 300000.
At this point up the range, we expect our R&D to be approximately 1.9 million and the SGN they should be approximately 1.6 million.
After interest expense other income and taxes at the midpoint of this range.
We currently forecasts on non-GAAP net loss well to approximately 2 million or net loss of 23 cents per share based on approximately 8.6 million shares outstanding.
Most of the differences between GAAP and non-GAAP results.
Stock based compensation expense.
In the first quarter, we had approximately 1 million awesome performance based on our Hughes network canceled.
Which resulted in that 398000 credit flood total stock based compensation.
We expect that stock based compensation to return to the 8000.
Dollars range for the foreseeable future.
Finally in Q2, we expect the cash usage to being the range of 1.7 to 2.2 million.
The cash usage includes approximately 150000 for restructuring related payment and the roughly 500000 for iOS as three related inventory purchase.
Starting this quarter were increasing our wafer and assembly starts for yields have three to ensure we have to inventory to meet a forecasted the demand from our customers.
Also related to our cash utilization.
Last week.
Successfully secured a paycheck protection program or so called PPP loan from the SB eight.
The low amount is approximately $1.2 million received on may eight and has favorable terms.
The first the payment of bets low as a deferred for six months.
We will use the phones, primarily for employee payroll and benefits.
The full details of this is all are included in the 8-K, we filed with the FCC right before the start of lets call.
With that let me now I'll turn the call back over to Brian for his closing remarks.
Thank you Sue.
Well, we work through the challenges the cover 19 pandemic has created we are executing on all of our product advancements in extending our customer reach and market opportunities.
We have created a nimble and lean organization focused on ensuring quicklogic moves to a path to sustainable profitability.
In closing I would like to thank all of our stakeholders, including customers suppliers and shareholders for their support and partnership.
After protecting our employees and their families. My highest priority is ensuring we do everything we can to help our customers both in supply of products today and continuing to execute on new product programs to ensure both of our success in the future.
That completes our prepared remarks, operator, I'd now like to open the call for questions.
Thank you.
Now be conducting a question answer session. If he would like to ask a question. Please press star one on your telephone keypad confirmation John will indicate your line is and the question Q you May Press Star too if you would like to remove your question from the Q.
For participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.
One moment, please balde poll for questions.
The first question is from Suji Desilva Ross. Please go ahead.
Hi, Brian Hi, Sue so guidance.
The guidance to the new product segment recovering from 500000 to 1.1 million can you talk about what the drivers are there is that mostly kyocera are there other large buckets of revenue that are helping that recovery.
Okay, and then looking ahead for Kyocera Aegis, you said I believe there's limited impact what's the linearity expectation for kyocera, well ramp linearly throughout the year and really where there are no changes to their forecast because the cobot, even post the quarter close.
And so the first three funds that I talked about where effectively not fall launch of last year. The fourth one that would be categorized as like a spring launch of this year and then we are anticipating those additional phones to come online probably in the later summer timeframe for us to shifts so that they couldn't watch those in the fall timeframe.
So by that point will have.
Several funds concurrently shipping.
Which is why we think the revenue for that is going to continue to be strong through this year, but yeah. We havent seen any any downside effects from a from covered 19 with respect to their their shipping patterns.
Okay, I was hoping Brian you could clarify on the smart TV, Rick remote control. It's I I believe you said they fell back in an older is designed to buy if I heard you correctly or just a redesigned where you weren't designed and if you could provide some color there and what they didn't how are they were able to make that switch that will be helpful to know.
Yes, the basically the way they test their products they get these things out into.
Sort of residential test environment to do user experience testing before they push product out and the fact that boards are having to be shipped all over the world to get those those test someplace in the boards to a appropriate level of quality to ship to them all of those were delayed and so at that basically caused them to miss the window to include that.
In the Big box bundle watch that they were going to do for the holiday season. This year.
And as such they're not going to have always on voice and not.
They're gonna go back to a different version that doesn't support always on voice front for that launch.
So unfortunately that means that because we're enabling about future we're not going to be included in that that remote down.
There are other customers are working with us or we're going to reuse. The engineering work that we put into that but obviously, it's very disappointing from a 2020 revenue impact to us.
Absolutely right I'm, just trying understand was that an older version of the remote they fell back on.
Yes, it's a previous version that does not have always on voice got it. Okay. That's how I understand that dynamic and then lastly, a quick question on Amazon, a and B S waiting to timing achieving that certification is.
Yes.
If I say somebody like us I think it soon it gets pushed out there this time.
We've actually made some pretty immaterial milestone investments in that area.
We've we've submitted some actual documentation and we're in the process of scheduling lab time now with them to get that certification. So.
I'm hopeful that it will be done by the end of the quarter this quarter.
But some of that just depends on making sure that we actually get a slot in the lab to do that and as you can imagine there's social doesn't seem going on to reduce the number of resources to do those test in the labs.
But we're working really closely with them now to try to make sure we get allocated spot and get in to the to the testing I'm confident once rent are going to pass because we have allowed replicated here on site.
And we've added our solution with all of the right test criteria to pass. So it's really just a matter of getting into the lab now and getting the paperwork done.
Ill jump back into queue, nice job, an execution and very tough environment.
Thanks.
The next question is from Rick Neaton Vigor sure. Please go ahead.
Hi, Brian Hi, Sue.
Rugrats relations on some pretty good execution in.
Tough times here.
Are you having any issues at your Ah that's your fab like global foundries.
Better covert related.
In order.
It could impact your ability to them.
You have enough product to ship.
Not from a wafer fab point of view I think Dave.
They've executed pretty well.
And I think with the wafer starts that were basically starting now to to keep up with the forecasted demand I think we'll be fine for that the the issues I was alluding to in my part of the scripts Rick were related to a assembly.
We do assemble one of our packages on iOS as three in the Philippines and they went on.
Very strict transportation policy on to the point, where our assembly partner there had to basically put up temporary dormitories to have people on site. So they wouldn't have to take transportation, but there are still operating on a very reduced.
Capacity.
I think they've done an amazing job as I said in the script and we're getting back to normal.
And so it's really been an assembly crunch tickets are not not not a wafer fab.
Thanks for that color.
Are the volume shipments of quick rather consistent with what your expectations were through this point in time.
Well, we are getting ready to ship those we did the press release launch in March just to make people aware of it we got a lot of people wanting boards that we're not shipped yet with very limited marketing on our part so far I think once we do actually do this launch in the coming few weeks here, we're going to.
Start to see a lot of influx of interest in orders I think that.
I said in his script several hundred or a few hundred boards. This quarter I think we've got a chance to exceed that.
A good chance of exceeding that and get getting closer to the.
The thousand or so that we'd like to get out there.
In the coming couple of months.
And when you said that the second product is ready to go live and on announcement in the next few weeks or in the coming weeks I think where your words.
Is that for additional boards or is that a different kind of product and is that something that will happen.
This quarter or rule that happened in the second half.
Yes.
My question, because I can probably a little more clarity now that we're in the queue in his section so.
Quick feather is is just sort of the starting point of this whole initiative with this mega cap company. Its one board where there are some tools that we talked about in the press release all of that is going to become very clear that this is a very large and strategic initiative between us and this mega cap company.
That we will announce in the coming weeks along with additional tools.
The come out of this that you'll also in the future C.
Potentially a second board coming out that we haven't announced yet.
That will be a little bit in the future that'll address a assortment different set of users are used cases than the first one so.
Again this this whole thing when it finally now so it's going to be clear that this is a pretty major undertaking by us in terms of strategic initiatives.
As much further than just.
One development kit.
Some of your other strategic partnerships that you've talked about in the past or those being affected by covert.
Like a size fiber or other.
Partnerships like that or are those remain on track for.
Later this year early next year.
I think some of the they're really impact ones as far as the up on marketing go is with a Anthony on a flextronics because there was a whole series of Aiotv Road shows that we're going to take place and these are going to be.
In person seminars and those are basically put on pause and now everything is being done to resume.
Those types of meetings, so that definitely impacted getting out the message and getting design started with people I think once we start relaxing and getting back to the point, where we can actually go to face to face meetings and we'll start to.
Reinvigorate that go to market planned with both of those large companies those are probably the.
The biggest impacted one fisher.
[noise]. Okay. One last question when you talked about your view of how much your full year revenue might be impacted do all of the cove it affects.
Your original outlook was mid to high teens in terms of revenue if I do some quick cocktail napkins calculations here mid teens seems to still be in play here is that how I should look at it.
Yeah, I think from a teens point of view, it's more like the low to the mid teens or mid teens is sort of the.
The ceiling of that.
And that would be an appropriate way to look at it from a revenue probably for the year.
Okay. Thanks, Brian I appreciate your information.
Thank you Rick.
[laughter].
<unk> is from Richard Shannon of Craig Hallum. Please go ahead.
Thanks, Brian and Sue for taking my questions as well.
Yes, let me talk about their ask a question about the military market the opportunity there it sounded like that's one of the fear is it hasn't been affected by Kobe does that.
Is that something where are your expectations of actually improved since last conference calibre.
Yeah, we've seen some pretty steady orders from our military customers.
They don't seem to have any budgets affected by this and because a lot of the revenue we have today are.
Basically designs are already done.
Previously, we're not having a situation where you know design teams aren't available to get on the hardware. So yeah from that standpoint, it's going on really well.
We have that the embedded Peach IP license, which you can imagine is for.
Military like application because its radiation hardened.
That's a good good thing that I think hopefully will each others, where we are seeing.
From a military point of view some of the customers that work and.
Secured projects that are on that have to go home and work now they can access some of the systems through the end that they would normally be able to access when they're on premises.
So some of those have pushed out conversations around IP licensing.
And I think once they're back online what should be hopefully in the next month or two those will start progressing again.
But those.
For the most part those who are part of our revenue plan for this year those were longer term occasions.
Okay, maybe a segueing off is one of those one of those comments and there Brian regarding embedded that PJ, how would you characterize the impact to us from coal would hear your your forecast I am I was going through my notes quickly I didn't see any mention of that I may have missed it but is your outlook for bad debt PJ lower than.
What it was or is it still largely intact.
So within the name rate changes by product line related to cover it was more of the company overall, but I can't say that the yet PG a part of the forecast is largely unchanged from from pre covered to now.
The bigger changes around the the other other categories of products.
Okay specifically.
[noise] sensible.
Great, Okay, and Brian if you characterize how many bid if P.J. licenses you expect to too.
Signed this year, maybe a range I know you can't predict the exact number but nobody should we should we think about here that are at least we can announce the identity or at least that you've signed something is that something and get to a half dozen or.
That.
Maybe I'll just let you answer the question.
I think if you guys have helped us and I'd be I'd be happy I was going to say, it's probably going to be one that I can count with fingers and if I'm on one hand.
If we can do I think that's that's a good good place for a stand up for the year.
Okay, especially in light if that helps choice.
Okay.
Opportunity with earbuds sounds interesting, but a as you've alluded to in your comments is it's a market dominated by one large very large company and a unified a couple others are coming up Mark there also large companies.
Fair to think of your potential customer base here is kind of being OTM, serving your tier two and potentially lower market or do you have an opportunity with you know.
You know companies, who can get you to what you might consider a tier one type of an opportunity.
We do have one engagement that would be classified as a tier one.
Most of these are tier to some of which would be done directly or or through annuity EM.
The interesting thing right now I think that's been brought on by this whole pandemic has so many people are doing.
Telecommuting are working from home and that's actually driving more here, but sales I think because they want to.
Connect and and not have to have the over the head speaker or not use Apollo comp.
So we do see increased interest and demand.
But for the majority of our funnel, we're talking about a tier two guys. There's one tier one.
Okay. That's helpful. One last quick question for Sue maybe kind of a two parter here.
The guidance for the quarter I'd missed your gross margin number what was that please.
Hi, Richard Thanks.
Okay.
Well Q2 weeks back there on non-GAAP gross margin to be at 61, Chris said.
Last one liners sweepers.
Okay and to follow that up to the kind of the breakeven model I think he said 6 million or more does that still look at gross margins kind of low to mid sixtys or has it changed.
It's yeah that low to mid 60.
Yeah, that's six now of knowledge around me.
Okay fair enough to breakeven.
<unk>.
Okay, perfect I think thats all the questions for me thanks, guys.
Hey, Richard just so why aren't there.
Saw their common one hour when guys on modeling for stock based comp for Q2.
Moving forward I believe right.
I see an 8-K is 800000.
Per quarter takes you can't get Matt.
I think one think I didn't get that's it thanks are reiterating it.
Thank you.
The next question is from Martin Yang of Oppenheimer. Please go ahead.
Hi, Brian Hi, Steve can you hear me all right.
Yes, we can Martin slipped perfect. So regarding a business your wireless space and wireless test that space. How much do you think those business potential business are related to Amazon, they've yes, and how much are exposed to other white label opportunities.
So I would say the.
The majority of the opportunities by number would be related to Amazon ABS for the headset specifically.
Because a lot of those are U.S. or European tier two companies.
By volume, there's probably more opportunity for us still in Asia.
Non ABS because they have for they tend to have local.
Wake worried or local services like in China that they'd like to do these headsets for that are not Amazon.
They do not connected Tvs.
So it's sort of the how does the breakdown of it and our and our funnel today.
And Oh today.
At this thing papers in the time to market do you think that maybe as will be start showing up on your revenues sooner gun arrests or are they there's no distinct difference between too.
You know we're forecasting both will have revenue in the second half for us.
The the steepness of the ramp for the Chinese on will be higher just because they do more volume of some of these your but or a stick type products.
For the for the western countries that use like the ABS ones, even if it was through though do you have it would probably a little bit slower to market just because I think they tend to be a little bit more methodical in their their test processes.
No.
But certainly on once we do get the certification and that becomes a basically in OTM type product.
For us the that it should help us be more efficient and how we get to revenue because of the product essentially is done at that point.
Whereas a lot of these engagements in China, if they do need a custom wake where that our provider or software partners can do they still have to go through that.
Creation and validation process, whereas on the ABS side, it's basically done and ready to go once we pass certification there's no more changing.
Got it.
Next question on so regarding any impacts regarding cooking lighting is there any impacts on your next generation product design and broke.
Not really were largely able to do most of our work remote I think our engineering team has done an amazing job it getting.
Getting set up promote and continuing to work on things.
So there they're progressing on all those all those initiatives.
The thing that I alluded to on the call that.
I haven't been asked about yet and then in the queue and as section is is what we can do related to.
I'm Cobot 19, with sensible and Thats one of the values of having a software business is that we don't really need to be in the office per se to get worked on on that and enable people. So even though everybody's working remotely. So small teams put together is way of doing crowd sourcing of cost data getting those models those baseline.
Models to acquire we I was at least comfortable and mentioning it on the call ever going to flip that site public. This evening for everybody in anybody to come in and start contributing to that so we call. The part of that solution. So those types of things I think as.
We can do that just fine without being in the office and in fact, I wasn't even part of our our scope in the last call to new opportunity that came up from this that we're we're driving on and I think will bear fruit.
Okay.
Last question for me, then I'll jump back into queue. So when you talk.
When we look at the opportunity with the Mega cap company I think quick that there's a very catchy name and can you help frame how.
That solution will be marketed or to the broader developer community are they going to highlight quick feather and your company's name as well.
Yeah, I think without spilling all the beans, right now its they are going to be referring to our name and the quick further.
They're going to be taking several of those units and helping get those out to their community both internal to that company and 10 folks and their ecosystem.
That's what they're going to do.
But we're going to do in parallel because this is not an exclusive.
Element kit, we're gonna be getting it out to our channel partners.
We currently have.
There's also several.
Open source hardware.
Hi, guys Gals folks got communities that were going to be seeding the sports with I think oh.
Hopefully have a very positive experience and then start some level of viral marketing with that.
And so those are sort of the three avenues that we're looking out to get the word out about this board.
The Mega cap company, our traditional distribution channels and then a more viral marketing approach of people that are really big on open source hardware.
Thank you.
Preference.
This concludes todays question and answer session I would like to turn the floor back to Brian States for closing comments.
Yes. Thank you for your participation in today's call and continued support we look forward to speaking with you again, when we report our fiscal first quarter results to the second quarter results in August Thank you and goodbye.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
[music].