Q2 2021 QuickLogic Corp Earnings Call
[music].
Ladies and gentlemen, good afternoon.
At this time I'd like to welcome everyone to a quick larger corporations second quarter fiscal year 2021 earnings results conference call.
As a reminder, today's call is being recorded for replay purposes through August 24.2021.
I would now like to turn the conference over to Mr. Jim Fanucchi of Darrow Associates. Mr. Fanucchi. 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 Anthony conscious 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 quick logic 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 <unk> future stock performance design activity and its ability to convert new design opportunities into production ship.
<unk>.
Timing and market acceptance of its customers' products schedule changes and projected 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 quick logics. Most recent filed periodic reports with the SEC.
Quick logic assumes no obligation to update any forward looking statements or information, which speaks 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 fine.
Statements. We have also posted an updated financial table on our IR webpage that provides current and historical non-GAAP data. Please note quick logic 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.
All information and quick logic 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 a quick logics IR web page. 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 2021 financial results conference call.
I am pleased with the progress we continue to make on the transformation of our business.
In the second quarter, our revenue grew to $2.9 million up approximately 30% sequentially.
And reaching our highest level since the first quarter of fiscal 2019.
During the quarter, we delivered an FPGA IP core to our first full license customer using our soon to be announced automated IP generated flow that integrates open source software with our three decades of experience delivering programmable logic.
In addition, we significantly grew both FPGA and FPGA opportunities, which bodes well for future revenue performance. We are now at the tipping point for scaling this new FPGA and FPGA approach much more broadly and the timing is coinciding with generally increasing mark.
Demand.
Our pipeline of new business remains strong with the vast majority of large opportunities continuing to advance.
We also saw acceleration in the number of Rfps and RF skews I discussed previously.
Some of the more exciting opportunities include several in the Iot military aerospace and defense markets.
We should see the number of wins continue to improve through the remainder of the year, leading to a substantial increase in annual revenue better bottom line performance and significantly lower cash usage.
With each passing quarter, it is becoming crystal clear that our move to leverage and build upon the open source tool model continues to be the right move for quick logic.
Artificial intelligence and machine learning technologies, now power, a rapidly expanding range of products and applications.
The advantages of open source tools, including Decentralisation cost efficiency transparency and customization or things. We recognized early on and have been actively advocating we remain confident we are on the right path and that our results over the next few quarters will show continued.
Progress.
Recently several of the largest semiconductor and related companies have discussed issues around their supply chains and corresponding impact on revenue.
While we have not seen these same conditions affecting our business to the degree others have discussed.
We are seeing increased lead times for certain packages. We are reacting to this in several ways, including carrying additional inventory to provide some buffer as well as communicating longer lead times to our customers and distribution partners.
We continue to monitor and we'll adjust our business based on these evolving conditions.
Before I get into my more detailed overview of our quarterly progress I want to provide an update on the status of formalizing a strategic initiative with a consortium of partners.
You may remember that at the time of our February call all signs pointed to one such initiative being funded by the end of February.
Although we have a signed memorandum of understanding and our discussions continue to move forward. The funding of that initiative has not yet closed we will provide further updates when there is meaningful progress.
Now I will move the discussion to some of the recent events that reinforced the themes we have discussed recently.
Our sensible subsidiary had some important news during the quarter.
First sensible announced that it has partners partnered with global semiconductor company Microchip technology to.
To simplify the development of artificial intelligence code for smart industrial consumer and commercial edge Iot applications.
Microchip is using sensible to create an automated design flow.
These tools can easily tap into sensor data from the M. P Lab X I D E and generate machine learning models that transform physical sensor endpoints into application specific intelligence sensors.
The agreement is a further testament to the robust sensible analytics tool kit and its capabilities as more top tier semiconductor companies and Oems look to add machine learning to their existing designs.
In May we announced the joint development of an AI enabled industrial Iot solution for predictive maintenance applications with our customer AI sensing.
The solution is based on our quick AI platform, which includes the ultra low power <unk> III Multicore sensor processing Soc.
Further development kit and sensible analytics tool kit for endpoint AI applications.
Through this powerful set of technologies AI sensing has developed a vibration sensor that employs artificial intelligence and machine learning techniques to intelligently monitor equipment status and identifying signal when different fault modes occur often called predictive maintenance.
Wanted to highlight this specific example to further demonstrate how this combination can be used by companies to develop a near infinite set of AI and ml applications.
One other note on quick feather, our order demand remains strong as we have been averaging over to Dev kits sold per day, so far this year.
By the end of Q2, we had sold well over 1000 boards.
As an update to our Sparkman initiative. They have created a diversion of quick feather called thing plus U S. S. Three that was launched on crowd supply users.
Users can implement some interesting.
Examples with quick logics, sensible and Google's Tensorflow Lite AI software using this Dev kit.
This is a perfect example of convergence of multiple platforms into one product that we can sell to a broad set of customers Board started shipping in Q2, and we ended the quarter shipping more than 100 kits and are seeing no let up in demand.
Our distribution channels expanded in the June quarter, as we announced new partnerships and agreements for both quick logic and sensible.
<unk> signed a worldwide distribution agreement with Digi key electronics through the agreement <unk> now offers that basic edition of <unk> analytics toolkit globally for customers, who need a complete development workflow for data collection labeling model generation and test validation of embedded AI.
Moreover, we are in the process of adding quick logic devices, and Dev kits to Digi key shortly and.
In doing so our products will be available via two of the most popular worldwide electronics distributors Digi key and mouser.
Those are some of the recent highlights I wanted to address now I want to briefly touch on a few areas. We have discussed in recent calls.
Our quick logic open Reconfigurable computing or Cork initiative that was launched last year continues to gain traction.
As a reminder, we are taking some of our proprietary technology and combining that with the open source tools that are being developed specifically for FPGA technology.
We currently have some initial support on a couple of different devices and Ips that we control and I expect it will only grow from there.
In addition, we continue to see growth in the SaaS software and IP licensing side of our business, including our embedded FPGA programmable technology, and our sensible AI software platform or.
Our primary focus for sensible has been building out the platform with different partner companies. Some of which include multinational microcontroller companies like S. T microelectronics, and NXP and more recently silicon labs and microchip.
Lastly, sensible is integration with Google's Tensorflow Lite AI software framework has been going according to plan.
A lot of good things are happening as we build out our ecosystem and I am confident these efforts are going to lead to customers signing up for full SaaS or taking full licensees of our technology in the coming quarters.
Work on our embedded FPGA initiative has accelerated after we joined the darker toolbox earlier this year.
We were invited to join this specifically because of our work in the open source FPGA area.
A question I often get asked is why would DARPA care about FPGA technology.
You must remember the U S government and defense contractors and companies that create those types of products are buying hundreds of millions of dollars a year and FPGA technology to be used across various applications.
They include items, such as flight control systems Communications processors and more.
It is true that many of these companies tend to also design their own custom Asics.
But what we're seeing is the beginning of the evolution that over time, we believe will be the blending of ASIC and FPGA into the same chip.
This can't be done unless the FPGA was it that was a discreet chip is now an IP to be integrated into an ASIC.
This embedded FPGA IP technology is one of our core competencies, where we have a distinct advantage one which we are building on for the future.
Excuse me for one moment.
Coming back.
Because with Amazon continues with our design work with the Alexa voice services. The customized design kits were fully certified earlier this year.
Designers can prototype a proof of concept using the Alexa wake word kit and at the heart of the board as our low power technology.
They're all very reasonably priced easy to use and they're all based on our open source Cork software tools.
The proliferation of these kits is about getting the technology out into the masses.
The open source tools platform has many advantages, including decentralization cost efficiency and customization.
Things that we recognized early on and have been actively advocating.
In fact, our own Cork initiative as leveraged a complete set of open source tools and platforms that effort is dramatically broadened our potential user base and increased design activity for our devices.
We are pleased to see others, recognizing the benefits of this approach, which should broaden the available market over several years.
Our smartphone business has been one of the strengths that fiscal 2021 with our technology now embedded in 10 handsets, including several <unk> related phones.
We expect one or two additional models to come out before the end of the year further solidifying our growth in the smartphone area.
Regarding our mature product segment, we saw a healthy jump in revenue from the prior quarter. This was due primarily to strengthen our military and defense customer base, coupled with the fact that we have been proactively maintaining an inventory from which we can quickly service customer demand.
There is no question, our mature product business has been significantly impacted by the COVID-19 related disruptions.
Especially around the civilian aerospace market, where one of our largest customers Honeywell is a large player while global air travel is beginning to pick up with the recent upswing in Covid cases across many parts of the world We must remain cautious in our outlook for a mature business.
As such we maintain that our mature product revenue will be roughly flat with 2020.
The last 18 months have been an extraordinary time for all of US the headwinds for quick logic in our industry had been changing however, we are starting to see green shoots across multiple parts of our business.
While it is still too early to claim victory, our Q2 revenue growth and expected significant sequential improvement in Q3 are a testament that the reinvention of quick logic is translating into significantly better financial results.
Finally, we have all seen the recent rise in Covid cases, due to the proliferation of the Delta variance.
Safety of our team and customers continues to be the most important priority for me.
And at this time I would again like to thank the quick logic team members for their continued dedication and resiliency during these unprecedented times.
With that I will turn the call over to Anthony.
Thank you, Brian and good afternoon to everyone joining us as.
As Brian mentioned, our revenue results were within the expectations, we provided in our previous call or.
For the second quarter of fiscal 2020. One revenue was $2.9 million. This compares with revenue of approximately $2.2 million in both the first quarter of 2021 and second quarter of 2020.
Within our Q2 revenue sales of new products were approximately $1.3 million. This compares with about $1.1 million last quarter and 820000 in the second quarter of 2020.
Our mature product revenue was approximately $1.6 million compared with $1.2 million last quarter and $1.4 million in the second quarter of last year.
In the second quarter, we had two customers, who each accounted for 10% or more of our revenue.
Non-GAAP gross margin in Q2 was 51, 5% compared with 52, 7%.
In the prior quarter and 47, 1% in the same quarter of 2020.
The decrease in margin was due primarily to a write down of raw materials of 156000, which impacted gross margin by approximately 5%.
This write down.
This write down our Q2 gross margin would have been <unk>.
<unk>, 56% at the midpoint of our guidance.
We continue to believe gross margin will get into the mid 60% range by the end of the year I will discuss our gross margin outlook in a few minutes.
Non-GAAP operating expenses for Q2 were approximately three 3%. This compares with three 5% in Q$4.2 million.
In second quarter of last year.
Within our Q2 operating expenses R&D was $1.6 million and SG&A was $1.7 million. This compares with R&D and SG&A $1.7 million and $1.8 million respectively.
Last quarter, and $1.7 million and $1.4 million, respectively in the second quarter of last year.
The net total of other income expenses and taxes in Q2 was a charge of $50000 compared with a credit of $1 million in Q1, and a credit of 99000 in the second quarter of last year. As a reminder, the credit in Q1 was related to the forgiveness of the PPP loan.
Non-GAAP net loss was $1.9 million or a loss of <unk> 16 per share based on 11.5 million shares and this compares with a net loss of $1.3 million or <unk> 12 per share last quarter and a net loss of $22.2 million or 26 cents per share in the second quarter of last.
Year.
The total cash at the end of Q2 was $19 million compared with $20.9 million at the end of last quarter. The cash balances also include the $15 million draw on our revolving line of credit.
Now moving to our guidance for the third quarter of fiscal 2021, which will end on October October 3rd 2021.
The revenue guidance for Q3 is three eight.
Minus 15% this midpoint would represent a sequential increase of approximately 30%. We believe total revenue in Q3 will be comprised of approximately $2.8 million or four new products and 1.1 million Gordon mature product revenue of note. This new product revenue guidance would represent the highest.
Quarterly revenue since Q3 of 2015.
In addition, when combining the midpoint of this range with the results from our first two quarters. We remain on track to increase to increase system 2021 revenue by around 50% over the prior fiscal year.
Based on the expected revenue mix non-GAAP gross margin for the quarter will be approximately 66% plus or -5% the increase over the prior quarter is attributable to increases in IP related revenue as well as product mix.
Our non-GAAP operating expenses will remain approximately $3.3 million plus or -300000 at the midpoint of the Q2 range, we expect R&D expenses.
The approximately $1.7 million and SG&A expenses.
It would be approximately one 6 million we continue to believe operating expenses will remain in this range.
The remainder of the year.
Your interest expense other income and taxes, we currently podcast, our non-GAAP net loss to be approximately 730000 or a net loss of six cents per share based on roughly 11.5 million shares outstanding.
Most of the difference between our GAAP and non-GAAP results is our stock based compensation expense, we expect stock based comp to be in the range of 800000 for the next few quarters.
Where the balance sheet in Q3, we expect pass.
Usage to.
To significantly improve and be in the range of 500000 to 700000.
With that let me now turn the call back over to Brian for his closing remarks.
Thank you Anthony and one point of clarification I'd like to make is without the Q2 write down on the gross margin in Q2 would have been approximately 56% at the midpoint of guidance just to clarify.
And now moving to my closing remarks.
Before we move onto the Q&A I want to reiterate that I am very excited about where we are as a company.
We have the right suite of products and capabilities that are being used by a broad range of current and new customers. We've.
We've made a lot of strides in enabling the broader ecosystem with well known firms such as Silicon Labs', Microchip SD micro and NXP, we continue to advance several multimillion dollar opportunities forward many more than we did even a year ago.
The trends are clearly in our favor as the proliferation of machine learning and AI is driving the transformation of edge computing.
Quick question, because a strong product portfolio to address this transformation from R. F. P. J IP licensing from our device business or from a sensible AI software platform that sits on top and runs on anybody's processor.
Most importantly, our financial performance is improving as Anthony discussed in the revenue guidance for Q3, the midpoint of $3.8 million would be the highest revenue quarter. Since Q3 of 2015 with corresponding improvement to the bottom line the.
The transformation of quick logic continues and we believe the best is yet to come in the very near future that completes.
Our prepared remarks, operator, I would now like to open the call for questions.
Ladies and gentlemen, we will now have a question and answer session.
If he would like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate that your line is in the question queue.
You May also press star two if he would like to remove your question from the queue.
One moment, please vote now poll for questions.
Yeah.
Our first question comes from Sujit de Silva with Roth Capital. Please proceed with your question.
Hi, Brian Hi, Anthony again, congratulations on the new product growth in the guidance.
Good.
Good good asbestos start second half of the area.
A couple of clarifications first of all the gross margin I want to be clear I heard it right is the guidance, 56% or 66% I couldn't hear it right.
66%.
656, right now.
56% will be clearer there. Thank you.
Then.
Two Q1, the cash burn.
'twenty, one what was the cash burn.
Okay.
Go ahead Anthony.
Yes.
Q2 cash burn now.
Q2 cash burn was.
Let me second.
Sure.
And so the Q2 cash burn was.
Basically $1.94.
Between $9 million, Okay, great, Okay, Brian the new product growth, you're guiding for <unk> through 'twenty, one obviously very impressive.
What are maybe the one or two largest drivers there of that sequential growth just help us understand.
So the sequential growth drivers are related to our upside in smartphone.
Do you have IP related revenues is a big component of that coming in the quarter sequentially.
And then some strength in the military business.
All of them to new products.
So those are the three three large drivers of that sequentially.
Okay, and then the Brian specifically the FPGA you cited one customer I guess in <unk> 'twenty. One so is there a revenue from that customer that flow through into <unk> or is that new additional FPGA wins in <unk> 'twenty one.
What are kind of building on top of it.
It's actually both sushi.
I'd like to say, we're not in Kansas anymore.
We had some in Q2.
But definitely some of that is bleeding into Q3 from that customer as we have some customization of that on top.
But the big driver is going to be new opportunity coming into Q3 and.
We've just got an influx of F E FPGA opportunity specifically, even before the call today I was on two new calls with customers that wanted to talk about it that had heard that we are doing things and wanted to just start talking about doing a deal. So.
Very different times and a lot of the upside in interest were seeing right now.
On the FPGA side, specifically and more importantly, because we are doing it with open source.
Okay couple of last questions and I'll jump out of the queue here on the FPGA wins can you talk about what end markets. Those are in is at DARPA military or is it broader than that and then any color there would be helpful.
It's broader than that so some of the near term revenue.
Is related to audio processors and Iot broad market applications. We do have several in the funnel right now that are related to Mil Aero defense that were initially brought to us through this whole DARPA toolbox initiative.
Those generally take a little bit longer to close I guess unsurprisingly, but the nearest term revenues from more audio processing and.
Iot General purpose processors.
Okay, and then one last housekeeping question of the Europe, the mix of geographic European revenue grew significantly in the quarter versus <unk> versus <unk>, what was the what's the right. What's the driver there the shift there. Thanks.
Yeah.
Well I think Miller defenses coming on strong, which has historically been Europe and U S for us.
Asia Pac for us with the smartphones is the big driver in Japan, but the state side on the European side is military defense and then some of the IP.
The audio processors, specifically is isn't as a European company.
Okay. Thanks, Daniel and handling all the question do you think about it.
Alright.
Sorry, just one of the things that the gross margin for a for Q3 just in case audio broke up 66% six six.
That's what I was trying to get six six okay. Great. Thank you guys.
And I apologize.
Okay.
Thank you.
Our next question comes from Sam Peterman with Craig Hallum. Please proceed with your question.
Hi, guys. Thanks for taking my question I guess first one.
Just on modeling.
Our modeling you talked about mature products I think you said that the midpoint that would be about 1 million next quarter.
Just doing the math is not going to be flat versus 2020 that implies.
Now a pretty big fourth quarter or is that is that primarily just timing of the <unk>.
Lead times on inventory, which looks like a little low right now or is there kind of demand drivers in there that there should be aware of cutting into the F 22. Thanks.
Yeah. So historically, Sam Q3 is generally a light quarter on the mature side for us. If you look back several years a lot of that is because a heavy percentage of customers in that bucket for us our European and a lot of them tend to take longer holidays. During Q3. So that's one of the reasons why Q.
Three even at a million dollars is going to look like compared to previous quarters. We do expect that's going to be up next.
Next quarter, meaning Q4, this year compared to Q3 as well as some other domestic demand in the mature side to get it back to that sort of on par with last year.
And by the way just on that note just the sort of anecdotally we are starting to see some things come back online on the mature side from from previous quarters. So it does seem like people are getting back into normal operating mode and building a consumer products. So I think we will see some some uplift on that in Q4.
On the mature side specifically.
Okay, Great that's really helpful.
<unk>.
Second question just on the DARPA initiative.
I'm curious are you seeing any response from your competitors in terms of.
I guess, we're signing your open source approach right. I think you guys are the only one and they are doing <unk>.
Our open source.
Do you see anyone else kind of starting to think about approaching the market.
That way or do you think it'll stay the way it is for a long time for a while.
It's really bringing open source FPGA adds to that initiative.
But in the near term, we don't at least I haven't heard of any of our competitors jumping into the fray unless on the open source side.
I've talked about it a lot in the past on these calls in and podcast interviews I've done I think there's a there's a fear.
<unk> companies to do that and we were one of them for a long time before we got comfortable with how we could build a viable business around this.
So I think that's going to keep people out of it for a little while longer at least.
On the other hand.
When people join the Fray and come into the open source side, then I think everybody can take comfort in saying this is going to be much more mainstream and not as niches, maybe we thought so that's a good thing.
Especially because you know open source collectively gets better for everybody when more developers jump on board.
But in the near term I, just don't see anybody doing that yet.
Okay.
Thanks for that.
I think just one more for me I think he said the pipeline of strategic partners that you've talked about.
Is accelerating.
I believe last quarter, you talked about the pipeline you know kind of getting Rfps argues in the tens of millions.
Range total I think.
You're seeing an acceleration of that are you.
Is that in the similar range a leader.
Although you know tens of millions of dollars.
Crosses Rfps are cues and then are you also seeing.
An acceleration in those.
Those rfps argues transitioning to <unk>.
Customer orders.
Could talk a little bit about.
What are you seeing thats driving.
Driving that that'd be great.
Yeah.
Yeah, So I'll start with the bottom line impact first I mean part of the sequential increase for our guidance for this quarter was driven from some of those advancing into the the wind stage.
Is giving us the revenue.
Impact this quarter and I think next quarter and the quarter after that from the near term opportunities that we've closed.
Generally speaking, we're getting more million dollar type.
Opportunities coming in many of which that we already had or advanced.
To the next stage in the engagement process and then why I guess the question is why is that which was your last question I think there's a confluence of events happening here.
On the supply chain shortages, where people are getting absolutely cut off or they have to put to your peers in place with suppliers. They don't like that.
A lot of these companies have the scale to do their own chip design and so why would they do that.
They are looking at or maybe they should do their own chips and take more control of our supply chain and if theyre buying FPGA is from Xilinx and Intel and lattice then.
If they're going to integrate and do their own chips and wanted to get that programmable logic under that same device and that's where we come in with the IP licensing side.
And so I think that's a big component of this is just the taking control of their own destiny and building their own chips and vertically integrating.
That's one the second is I think it's pretty well documented as understood that FPGA is a very good technology for implementing machine learning and AI and there's a big push around the world to make things more intelligent in how do you accelerate that or how do you deal with lower power FPGA is a great technology for that and so if you combined sort of his technical need with a business need I think a lot of that.
It is driving some very near term demand to us as far as F. P. J and FPGA. So like I said, even this morning I was on two different customer calls new calls for people interested in this and they're just they're not happy with the status quo. They want to do something different there. They have the means to do their own chips, but they need the IP and that's where we come in.
<unk>.
Okay.
Okay. That's great. Thanks, Brian I think that's it for me.
Thanks, Tim.
Thank you.
As a reminder to our audience if you'd like to ask a question. Please press star one on your telephone keypad.
Our next question comes from Rick Newton with River Shore Investment Research. Please proceed with your question.
Thank you Hello, Brian and Anthony Thanks.
Thanks for a better news of this evening.
Hum.
First off I'd like to ask about the gross margin.
Is the decision to write down the raw materials in Q2 as that.
Factor in the.
Explosion of your gross margin to 66% in Q3 and when we see.
Further benefits in future quarters from that.
Let me explain the way these things work Rick so periodically we have to evaluate our inventory against future demands and we don't see.
Opportunities are orders for the future demand and we take reserves.
And then of course, if we've taken our reserves and yes in the future when we do sell it will get the gross margin benefit at that point.
But the the gross margin that Anthony guided to for this quarter is independent of those reserves that we took last quarter. So it's not an artificial inflation. That's a real gross margin number because we have a higher component of higher merchant and product revenue.
IP related revenue in the quarter, which again I think this is evidence of this model that we've been talking about that as we can transform the company to have a higher degree of soccer in IP sales in licensing and royalties, we are going to see that gross margin uplift into the mid and hopefully high <unk> in the future not from artificially.
Taking reserves against products and selling them in the future, but actual real products gross margins.
In your new product guidance for Q3.
How.
Irrelevant as central moves.
Progress and partnerships in that.
That number.
It's relevant but not material enough that we need to break it out as a separate number yet.
Okay.
When you talked about.
Your shoes in packaging.
Most companies are seeing various supply chain issues.
Their customers are and where the end users of their customers.
Maybe accounting for four 5%.
Softness in the revenue is that possibility included in your $3.8 million midpoint for Q3.
First off is that four or five 6% number relevant to you since you differentiated your.
Product demand from.
Their typical Oems.
And then.
Secondly is that a fair number to.
If that is a fair number or is that built in to the 15% plus or minus.
Sorry, Rick I don't I'm not following the 5% you were talking about can you elaborate a little bit okay. Some companies I'll try again, some companies are saying that their revenue they could have.
Shipped 5% more revenue in the quarter, but due to supply chain constraints there.
Shipments are constrained.
What I wanted to know was first is that a relevant number for quick logic and secondly.
If so is it built into your guidance with the plus or -15%.
So its not relevant the point I was trying to convey in the prepared remarks is that we acknowledged that there are.
<unk> in the supply chain, specifically on the packaging side.
But we're not constrained in our revenue this quarter because of that.
We've worked with our supply chain partners in fact, we brought up.
Second sources in certain cases, where things were like absolutely constrained and we couldn't get enough products to fulfill future periods or forecast. So we brought on second suppliers second sources. So that we could fulfill that demand and forecast. So the current quarter does not capacity constrained and there's no 5%.
<unk> as a result of that I can't speak to what other companies are saying to you, but that's not the case for us.
Okay.
<unk>.
And do you longer term.
Do you are you confident in your supply chain.
Your demand keeps expanding.
It has been this year for new product.
Yeah, I think so and in fact that the evidence I would use is that we already have gone through a situation, where we didn't have enough supply on a specific package substrate for some of the demand that we're seeing this year and we went out and we we got a pin compatible second source for that so we can continue to fulfill the demand so I think.
We're very.
We have a very good relationship with their supply chain.
We work with the leading companies in the world in that sense TSMC Globalfoundries amcor they.
They have lots of capacity that they're allocating we've got a good relationship and what Theyre really asking companies for is for forecast and if you give them a forecast and you're hitting the forecast they're going to give you the capacity and we're doing that.
And like I said, if they have if they're constrained in certain areas, we work with them to qualify a second source for that component. So.
I don't see us having an issue with that.
But we'll see like I said in the prepared remarks, we're going to continue to monitor this as it evolves.
Okay. So the supply chain is an opportunity for the <unk>.
Apply chain problems for others is creating opportunity for you and at least.
In the near future you don't see any issues constraining you. That's is that how I should take your remarks.
And in fact, I'm smiling right now because there are in fact.
Some FPGA as some low density F. P. J is that.
It's very difficult to get from competitors right now through a common distribution sources like Digi key and Mouser and that's one of the reasons why.
Those distributors.
I won't say names, but people that have reached out to us to add our product to their distribution channels. So that they actually do have parts that they have able to sell within weeks as opposed to quarters.
Lead time issue.
And so that's like in the prepared remarks, I talked about Digi key and mouser, So youre going to see quick logic devices on <unk> very soon which is another very large worldwide stocking distributor.
Partly because of the supply chain issues people want low density P. J as I can get them there.
Have to wait until February of next year, that's crazy.
We have things in stock and we can we can handle that so we're going to start pushing I think.
A little bit more into that territory as a result, so yeah I do think there's an opportunity there because we've we've navigated and manage that challenge on the supply chain side.
Okay.
Thanks for that extra color on that issue.
Thanks, a lot Brian I appreciate it.
No problem. Thank you Rick.
Okay.
Thank you.
Our next question comes from Martin Yang with Oppenheimer. Please proceed with your question.
Yeah.
Yeah.
Mercury Yang you May proceed with your question.
Thank you. Thank you for taking my question Brian Anthony.
First question is now.
Your assumptions behind your annual guidance, you're expecting revenue to be up.
A 50% year over year as the potential income from the strategic initiative, which you haven't really.
Identified a.
Target timeline for the funding part of that annual guidance.
The specific strategic initiatives that I mentioned in February and updated on on today's call is not part of the financial outlook for this year.
For Q3 and for Q4. This year. It is all based on other opportunities that we have closed.
Or darn near close to the point, where I felt comfortable to include in that.
Guidance for Q3 and outlook for Q4, not that other one did that one come in that is upside.
Mhm.
Did your key distribution agreement is.
Is it right to understand right now, it's sensible to get only and that you will at the devices and the Dev kit later.
That is correct and its not just a lot later, it's imminent.
Uh-huh, but can you maybe help us frame the potential revenue impact of signing another.
Major distribution partner, how how big of a boost that potentially can be free of revenues.
Yeah, I mean, I think this year it could be tens to hundreds of thousands of dollars through those because those are basically in that timeframe youre talking about customers that are looking for immediate product to start prototyping, either a new design or perhaps they're they're not able to ship their product because they were designed with other things that are not available.
And so they need to switch components to something else, which means in your printed circuit board. So.
Given we have a handful of months left in the year, we're talking about a small amount of revenue impact this year.
Looking forward, though we're talking about tapping into the broad swath of the market in terms of design engineers and we you know from day one when we launched this whole new open source initiative and serving the masses are.
People were asking hey, you need to be in a big distributor like Digi key you need to make it easy for me to get my credit card out and buy a device same with mouser and usually get on mouser. So I think we've we've done that now it's what the the engineering community likes and prefers our own engineers and factor for that.
Buying stuff off of Mouser and <unk>. So I think it's just removing another hurdle or a speed bump for people to start prototyping with the technology. This year and then of course getting into higher volumes next year.
Got it a final question from me is on sensible can you given the update.
You know what what do you consider the pipeline how that pipeline of potential subscribers or paying users has changed since last quarter.
I would say that the we have grown the community users for sure since we launched the community addition, we also launched a new priced here that's more of a project based priced here because there were folks that were uneasy to sign up to the $10000 House from you know from free to 10000, a quarter they wanted something.
More in the range of several thousand dollars that they could go through the whole full cycle before they commit to the sort of the longer term five digit SaaS fee and we've seen some uptake on that that that version.
There are some very large customers that have come in now were talking you know very substantial customers very well known names that have come in and we have signed agreements with them that actually couples the sort of project based SaaS space with a little bit of a service aside from us because a lot of people.
Intuitively know that AI can help and they want to use it but they don't quite have the data science expertise to actually build something out and so.
We're seeing some some ask on their part to bundle in a little bit more of the services side to sort of teach them how to use AI effectively and so we're seeing some of that progress happen.
In this quarter also that I think is going to be a good sign for future quarters really gets people more comfortable and removes that speed bump that hurdle.
To get them onboard the platform.
Got it.
Sometimes we forget that AI is still you know we've been reading about it for years right, but I think theres, a big difference between us reading about it and people actually that are not data scientists trying to implement something with AI.
And so we recognize that and we're trying to sort of adapt our go to market strategy to to help serve the big customers that you have.
The money to invest in it they just don't how to use it so we're trying to to get them through that cycle.
Yes understood.
Yeah Yeah.
Yeah.
Okay.
Thank you Martin.
Yeah.
Okay.
Ladies and gentlemen, we have reached the end of our allotted time.
I would now like to turn the floor back to Brian faith for any closing remarks.
In closing I want to thank you 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 third quarter results in November have a great day.
Ladies and gentlemen. This concludes today's okay. You may now disconnect your lines at this time.
Thank you for your participation and have a great day.