Q1 2022 QuickLogic Corp Earnings Call
Ladies and gentlemen, good afternoon at this time I'd like to welcome everyone to quick larger corporations first quarter fiscal year 2022 earnings results conference call.
As a reminder, today's call is being recorded for replay purposes through may 24th of 2022.
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 joining remotely as Elias Nader Senior Vice President and Chief Financial Officer. 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 quake logic future stock performance design activity and its ability to convert new design opportunities and your 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 quick logics. Most recently filed periodic reports with the SEC quick logic assumes no obligation to update any forward looking statements or information, which speak as of their 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 like logic.
It uses its website the company blog corporate Twitter account base book page and Linkedin page as channels of distribution of information about its business such information may be deemed material information and quick logic may use these channels to comply with its disclosure obligations under regulation FD a copy.
The prepared remarks made on today's call will be posted at <unk> IR webpage. Shortly after the conclusion of today's earnings call I would now like to turn the call over to Brian . Thank.
Thank you Jim Good afternoon, everyone and thank you all for joining our first quarter of fiscal 2022 financial results Conference call.
We are off to a great start this year as you can see from the press release issued after market close today. Our Q1 revenue was slightly above the midpoint of the guidance we gave in February .
Our revenue mix continues to trend toward higher growth segments, and we are seeing an even higher number of IP and open source related opportunities.
All of these items helped reduce a significant improvement over the results we reported in the first quarter a year ago.
As the first programmable logic company to actively contribute to a fully open source suite of development tools, we are gaining more traction in this market as potential customers are looking for differentiated and open source software solutions for their hardware.
I remain confident in our growth trajectory will continue.
Based on our current outlook, which we will provide later, we believe we will reach our profitability objective in the middle of this fiscal year.
Leading our revenue efforts will be open payment, our newly appointed Vice president of sales.
Oh, one it's been on the quick logic team for many years running our U S and European sales in fact much of our recent new product revenue is the result of about one sales leadership.
<unk> breadth of experience spans more than 30 years across many semiconductor sales positions, including strategic accounts direct sales international and channel sales.
He also has deep experience in the programmable logic industry.
I am pleased he accepted this critical role and we plan to work collaboratively to ensure the company's growth continues.
Now turning to the business review.
We have been very active since our last earnings call was several important events that are important to our growth leading off we announced two separate E. S. P. G. A contracts worth approximately two and a half million dollars. These contracts build on top of the contracts worth about $3 million that we announced in our last call.
In addition, recently one of our existing yes P. G. A contracts has been increased in value by at least 50%, which we expect to start recognizing in Q3.
Power Australis tool that was introduced last year enabled the upsizing of this particular E. S. P J contract through its inherent flexibility and automation.
Current and potential customers are recognizing that Australia allows us to compress the time. It takes to go from early engagement with the customer to IP delivery and then revenue. Moreover, australis allows us to be foundry and process node agnostic expanding our served available market significantly.
We have several bids in process most of which are seven digits in magnitude I can say that more often than not we get into the final rounds, and our odds of winning continue to improve.
As I noted in prior calls and Investor events. These wins bring the added bonus of no annual risk of losing the design to a competitor no inventory investment or risk and of course, no cogs on royalties for most wins, we generally start receiving an annuity royalty stream. After 12 to 15 months. This means for the wins in 2020.
One we should start to receive royalty revenue early next year.
During the quarter, we announced new E F. P. G. A IP support for two of the world's leading semiconductor foundries TSMC and Globalfoundries.
With T. S. M. C. D. We made available the first customer defined FPGA block targeting Tsmc's 22 nanometer process node.
The IP was developed using the australis IP generator tool, enabling rapid E. F. P. G. A I P generation, while shrinking the time to development for nearly any foundry and process node combination from a few months to a few weeks.
Now we have active customer engagements for our E. S. P. G E in four of the world's top five semiconductor foundries, TSMC Globalfoundries, Samsung and U M C.
Additionally, with our recent announcement with Sky water technologies. We also now have our E. F. P. G. A I P available and in onshore foundry focused on the radiation hardened to aerospace and defense markets.
Just to expand for a moment on our relationship with Sky water in March we announced quick logic is collaborating with sky water for Rad hard E. S. P. G. As further expanding their design ecosystem for advanced extreme environment solutions products are.
I expect it to come to market in the early 'twenty 'twenty four timeframes.
This technology can be embedded as an IP core in a sick and S. O C devices or implemented as a custom standalone Rad hard FPGA for mission critical and our Ruggedized applications.
These are used by space agencies private spaceflight companies the defense community and research scientists to ensure consistently reliable performance and longer service life.
Once you are designed into an application with one of the large companies that serve these markets. The tail will last for several years if not decades.
Based on recent commentary additional open sourced enabled designs will be important in the evolution and implementation of Rad hard solutions. For example high end applications in commercial markets are developing specifically does requiring radiation tolerant capabilities, while the technology specifications may not be as stringent as government sponsored.
Programs, the technology itself will be vitally important across a growing number of industries.
Currently our IP is available on certain nodes in these foundries. However, since we are now in the door, we have a better opportunity to more easily expand our offerings also the fact that we have IP relationships established with a four of the top five semiconductor foundries in the World is a testament to the value of our technology offering.
Just establishing the business and legal relationships with these foundries took a significant amount of time and resources all driven from customer demand.
You won't hear me continue to say this australis is quickly changing the game in terms of generating and delivering E. S. P. G. A IP for the foundry and process combination our customers need these partnerships with the major semiconductor foundries are just the beginning.
Our festival business had its best quarter of business development since our acquisition in 2019 in April we announced sensible is partnering with Silicon labs, one of the leaders in the fast growing Iot connected world.
<unk> is using the machine learning accelerator belt Intuit's latest silicon Labs' wireless S. Ocs to enable new edge AI ml applications for their customers together sensible and silicon labs are developing a proof of concept demonstration showing door locks, which use machine learning with audio sensors to detect and distinguish relatively.
Subtle acoustic events to strengthen home security.
This is a significant win for us and represents an expansion of sensor most partnership with Silicon labs.
Beyond this announcement with Silicon labs sensor more recently won its largest contract to date worth six digits with a large customer in the Iot space. We believe this agreement will lead to additional SaaS revenue and royalties early next year.
We also announced central now supports AI ml development for boards that feature Bosch sensor Tech sensors. This integration allows developers to use the sensible analytics tool kit to add local intelligence quickly and easily to Iot endpoint applications using any number of Bosch sensors for a variety of applications, including smart home and.
Building consumer and athletic Wearables and industrial automation.
In our February call I mentioned, a new collaboration with <unk> technology the.
The target of the collaboration is an FPGA based triplet that combines the best of both worlds with a variety of standards standard iOS and the flexibility of FPGA Programmability.
Semiconductor design is getting more expensive with some costs getting into the tens of millions of dollars for a chip design.
Chip, let's allow integration of existing devices at a significantly reduced cost the demand is high especially in the data center high speed computing and military markets. Some industry research firms have forecasted that the chip lit market could be in the tens of billions of dollars in the next several years.
Our starting point, that's been the Globalfoundries 22 F Dx process, which isn't node we have supported for some time now.
We are under evaluation with lead customers to see how we might architect a triplet that can be reused across multiple customers. This was spread out customer funded and ari across multiple implementations.
Yeah.
Shifting now to some of the other components of our business sales of our display bridge product remains strong as global supply chains remain challenged these supply issues, while a negative for the industry have been a positive for us as the constraints have created a worldwide shortage of certain display branch semiconductor solutions.
We have won multiple large designs for these products in the past quarter that we believe will contribute meaningful revenue later this year.
Head of this demand we have proactively implemented enhancements in our supply chain that will result in gross margin improvements for our display bridge products moving forward.
One area, where supply chain issues are slowing development and production is with our primary mobile phone customer.
While we continue to have new designs ready for market the supply disruptions are making it more difficult for our customer to build their product.
This was reflected by lower shipments in the first quarter that we believe will persist in the second quarter. At this time, we see no change in the outlook for the second half of the year for this customer.
And on the same topic of the global supply chain I want to reiterate that we don't experience. The same level of constraints that are impacting the broader IC related industry. Our sticking point is in the assembly and test part of the supply chain.
Capacity is staying tight and in order to get the access required we continue to increase our committed inventory for finished goods to help ease supply concerns.
Finally, excuse me finally in our mature product segment, we are starting to see some stabilization in bookings for this quarter and the balance of this year without good clarity on the macro economy. We currently believe mature revenue will be slightly down from 2021.
It has been a productive period for quick logic, and I'm as confident as ever that our positive trajectory is sustainable.
Let me now I'll turn the call over to Elias for a review of the financial results. The last please go ahead.
Thank you, Brian and good afternoon, everyone.
We delivered another quarter of financial improvement driven by the strong performance of our new products and further control of operating expenses.
Oh I also want to Echo Brian's earlier comments that we remain on track to achieve profitability in the middle of this year.
Okay.
Let me now turn to the review of the results for the first quarter of fiscal 2022.
Revenue in Q1 was $4 1 million bonds. This compares with 3.7 million last quarter and $2 2 million in the first quarter of 2021.
On a percentage basis Q1 revenue represented an increase of 11% compared with last quarter and up 8% when compared to the first quarter of 2021.
Yeah.
Within our Q1 revenue.
Sales of new products increased to approximately $3 5 million the highest since the third quarter of 2015.
This compares with $2 7 million last quarter.
And $1 1 million in the first quarter a year ago.
Mature product revenue was approximately zero point $7 million compared with $1 million last quarter and $1 2 million in Q1 last year.
Mature product sales continued to be limited by the lingering COVID-19 related issues faced in the served markets.
In Q1, we had three customers that each accounted for 10% or more of our revenue.
This compares with four in the prior quarter.
Yeah.
non-GAAP gross margin in Q1 was 61, 5%.
Up from 16, 1% in the prior quarter.
52, 7% in the same quarter of 2021.
The continued increase in new product revenue.
Primarily IP related genes on slightly lower material revenue.
Carries a higher gross margin influence gross margin for the quarter.
non-GAAP.
As in Q1 were approximately $3 1 million.
The Opex for Q1 was lower than our forecast due to the allocation of Simpson R&D expenses into cost of goods sold.
Q1, Opex compares with operating expenses of $2 7 million last quarter.
$3 5 million in the first quarter a year ago.
non-GAAP net loss was <unk> 8 million or a loss of six cents per share based on 12 1 million shares.
This compares with a net loss of <unk> 5 million or four cents per share last quarter.
On a net loss of $1 3 million or 12 cents per share in the first quarter of fiscal 2020 one.
Yeah.
Total cash at the end of Q1 was $20 1 million daus up from $19 6 million in the prior quarter.
The cash position includes gross proceeds of approximately $1 5 million from investors that we announced in February .
Which was partially offset by cash outflows related to normal expenditures during the first quarter.
Now moving to our guidance for the second quarter of fiscal 2022, which will end on July one.
2022.
The revenue guidance for Q2 was $4 5 million daus.
So minus 10%.
This would represent another quarter of strong growth.
Revenue is expected to be compromised of approximately $3 6 million up new products and 0.9 million virtual products.
Based on this revenue mix non-GAAP gross margins for the quarter would be approximately 67%.
Plus or minus five percentage points.
Our non-GAAP operating expenses will be approximately $3 2 million to $3 5 billion.
Longer term, we believe Opex will remain in the low 30 million range with the occasional increases to support new programs.
After interest expense other income and taxes, we currently forecast our non-GAAP net loss will be approximately 0.3 million or 220.5 million.
And net loss of two cents to four cents per share.
Based on roughly 12 3 million shares outstanding.
Most of that difference did you not GAAP and non-GAAP results is stock based compensation expense in.
In Q2, we expect this compensation will be approximately 0.5 million.
As a reminder, there will be movement in our stock based compensation over the course of the year.
Really each quarter based on the timing of grants and estimates women into proponents will need in the woods.
Well the balance sheet.
With continued investment to support the new design wins with discussed.
In Q2, we expect total cash balances to decrease between $1 2 million a $1 6 million.
With that let me now turn the call over to Brian for his closing remarks, Thank you very much.
Thank you Elias.
Quick logic is powering through the current macroeconomic headwinds we are expanding our footprint with leading semiconductor manufacturers building a growing pipeline of IP and software sales that will deliver both immediate and long term revenue while at the same time building a broader distribution ecosystem that gets our solutions in front of an ever expanding set of potential customers.
With the continued issues like the sudden COVID-19 shutdowns in China, and the warrant Ukraine. It is difficult to offer certainty. During these uncertain times. However, based on the items I discussed in our outlook for the next quarter and beyond I feel we are at the trajectory point in our business, where where we will deliver sustained revenue growth.
As I mentioned in our last call we tend to only guide one quarter at a time.
Last quarter I offered some additional thoughts on the year ahead, and now I feel it is important to offer a broader outlook in this call.
Based on the many items I covered today I am more confident in our ability to get to our revenue goal of $20 million. The revenue cadence will still be weighted more to the second half of 2022.
At this time I believe that the pathway for profitability. This year is clear barring any severe changes in the macroeconomic or geopolitical environment.
As good as the improvement has been over the last year I believe the next 12 months will be even better.
I would like to again, thank our key stakeholders, including investors customers suppliers and most of all the quick logic and sensible teams for their continued support.
That completes our prepared remarks, operator, I would now like to open the call for questions.
Thank you at this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on the telephone keypad, a confirmation tone will indicate that your line is in the queue.
You May press star two if he would like to remove your question from the queue and for participants using speaker equipment. It may be necessary to pick up your handset before pressing any sarkies.
One moment, please when we poll for any questions.
[laughter].
Our first question comes from the line of Tsuji de Silva with Roth Capital. Please proceed with your question.
Hi, Brian Hi, Elias congratulations on the progress here.
Did you, Brian I want to be able to pick up where you left off right at the end there in terms of talking about calendar 'twenty, two and the $12 million revenue Mark.
I'm I'm, just without obviously guiding I I'd imagine mature has a hard time kind of getting back to more historical levels. So that might apply youre approaching something of a $5 million a quarter run rate.
Quarterly rate at the end of the year or is that kind of the ballpark of where.
The revenue said it.
Yeah, I think in the prepared remarks, we mentioned and mature is probably not going to get back to the levels from last year.
The growth is clearly going to come from the new products. We've got a lot of wins that we've talked about already that we're executing on and we've got a lot of irons in the fire on new.
Designs that we're hoping to close very soon here.
And that would put us north of $5 million, if we're getting to that $20 million mark by the end of the year.
On a quarterly basis that's it.
That's the colors like in Quebec, and then and then all of this is with the smartphone market still being challenged and so that's really good for the efficacy on the a customer you talked about specifically get a contract you talked about the increased 50% from the from the existing level can you talk about the the driver for that kind of increase for our customer and the mechanism is it more nodes or just.
What's the what's the dynamic there.
Yeah. That's a great question it actually does come about down to looking at a different process technology node that they'd like the IP on <unk> from the original contract scope and again thankfully we have australis, we can pivot just as fast as the customer wants to and so we're able to do that and charge accordingly for it. So yeah. That's the bottom line is it's adding.
A different technology node to the mix for that customer and in executing on that and then capturing the value.
The increased contract size.
Does that feel like Brian our land and expand type of you know the initial successes, leading more successes that without what feels like.
Absolutely and we've had multiple examples of that now so I think once people really get their hands around E. S. P. J I T in and they start driving value from it then naturally I think theyre going to come back to us because I think we're a great supplier.
Not just in terms of technology and support but the fact that we can move as fast as they need to move.
Because of Australia. So yeah, that's definitely a land and expand on this customer we'd rather with a couple now and I do foresee that to be happening in the future and the big reason why by the way is if you go back to.
F P J as in general it's not just the IP creation and delivery. It's also the F. B J user tools. They have to go along with that so the user can actually program their own IP into the design and.
And so once people start getting accustomed to a specific software suite.
They don't want to change that so the land and expand as you know initially comes from the fact that we can be IP provider for they know the customer wants then it becomes the fact that they learn and like our software tools and then after that it's natural that we can we can expand with them because of the Strauss is automated and it gives us that capability.
Okay. That's helpful helpful insight, though Brian just a couple more for me and I'll pass it along when you talk about royalties kicking in you know 15 to 20 months after presumably early 'twenty three how do we think about our royalty rate on the unit run rate here, what's the what's the framework for how the royalties kind of layer on.
Generally speaking you can think of it as a very low single digit percentage of the E. S. P of the price or the ASP of the product. So if it's a.
Let's say, it's a microcontroller the Soc for dollar you know, you're probably going to get a nickel or lessen royalty per unit, if you're selling a device that could be you know a thousand dollars because it's in our radiation hardened environment or $10000. Then obviously that that royalty is going to be substantially higher in dollar terms.
Okay.
And then my last question you talked about chip, let's see I wasn't quite clear on where you are in that effort to create a triplet I guess you know a customer might want if you want a product ties it make it.
Make the architecture extensible across various foundries, so what what's the strategy there because that could really kind of ramp up your progress here, where the chip lift to be integrated into the packages, but just let me know kind of how that's going to start to play out.
Yeah, the way I would describe that sushi is that we've we've announced collaborations with Ito base there of high speed serial IP company semiconductor IP company and Theres a lot of value that end customers are seeing with S.
F P J and high speed serial Io is on the same device and its shelf life, there could be attached to other devices that they've already either built or intending to vote.
For reference companies like Intel.
Forgot mobile solutions group within Intel and Xilinx, not part of a M. D. A lot of their larger F. P. J is that are going into the high speed computing data center.
Infrastructure type applications are actually a variety of triplets within that package and I think with the with the supply chain constraints and their movement for higher speeds through five G and what people are trying to do in the data center now Theres a move afoot for companies to start building their own chocolates, but still be interacting with other shippers that are already in the <unk>.
<unk>.
And so we're in the process of discussing detailed architectures with a handful of customers to see if we can line up a common architecture that would make sense to produce and then be able to sell to.
Multiples of these companies is sort of the storefront so you're right once once that happens and we are the storefront for the triplet.
B I think some pretty big revenue upside for us because that's a device revenue not just an IP license, but as companies are going through this architecture face because people are still trying to grasp how would they architect a triplet into their system. What are the I OS what are their requirements. Unfortunately, and again, we have Australia. So we can sort of move along with the the architecture discussion.
The pace of the customer ultimately landing on an architecture that we would like to prototypes it'd be the storefront floor.
Excellent great progress guys. Thanks.
Thanks Adrian.
Our next question comes from the line of Rick and knee tenant with River Shore investment Research. Please proceed with your question.
Okay.
Thank you Hi, Brian .
Hi, Rick.
Hi.
<unk>.
On the on your smartphone customer Brian do you anticipate that.
Our customer being able to recover its.
Initial shipment forecast that it had for the first half of this year or are you seeing more of a permanent loss of opportunity.
They're in for this round of smartphones.
You know I I think we're in such a high attach rate of their phones that I know, they're trying their best to navigate the supply chain issues to the extent that they're even swapping out different sensors that are in there and putting new sensors and they can actually get a hold of so that they can continue to ship the funds that they'd like to ship.
For their their carrier customers and their end users. So I'm hopeful that they'll see some recovery in the second half, but I think that that just remains to be seen if they can actually.
Get the allocations that they need on the sensor side. The nice thing about our device as you're probably aware is that its sensor agnostic. So yes. It can be programmed to communicate with any of the sensors, we're working with them on that on the software side to ensure that as they find sensor products. We can easily support those and they can move on with shipping more product, which is beneficial to both of us.
Also the supply chain issues that have created new opportunities for you in display bridge or are they also creating other smart connectivity opportunities for you for some of your new products that have been around for several years.
But yeah, we're definitely seeing not at the same customers, but we are seeing some uptick in other customers looking at our smart connectivity or S. P J products.
There are certain ones that are already out of inventory that you know similar competitive devices in the market are short on and so we are capturing some of that opportunity and you see that reflected already in our in our financials.
The other interesting thing as far as Upselling or a land and expand strategy is that in some of these wins that we have with the display bridge, we're actually seeing some opportunities open up for E. S. P. G E R or even sensible.
So it is nice to be going in there with the full quiver of different arrows and we can Linda customer.
On your chip with development through you talk the tapas.
Are you seeing therefore, a logical progression since systems with cities.
Down to leading edge nodes and quick quadric, playing a role.
Some of the leading edge nodes as opposed to being at 16 22 28 nanometer.
Yeah, absolutely and in fact for everybody listening for their benefit we have a video.
The presentation that I participated in a few weeks ago with the open compute project, where we specifically talked a little bit about hardship lit status.
With each opus and what we're looking at and in one of my slides I, specifically said that we are looking at sub tenant sub 10 nanometer nodes for E. S. P. G. A development as it relates to the to the <unk>.
The strategy. So the short answer is yes, definitely we are not stopping at 22 or 16 or you know the nose above 10.
With Hum.
The likelihood that mature product revenue will be down a little bit this year versus last year.
That impacting your outlook towards your full year gross non-GAAP gross margin.
You may have been.
Optimistic earlier this year or.
Is the <unk>.
Growth of your IP revenue offsetting.
That loss of high gross margins in your mature product.
I think I'll, let Elias take that and then I can add color after that.
Okay.
Yeah, I I don't think that Oh.
Yeah.
We are pretty sure that mature products when will sustain its a its a its strength.
But it's probably not going to get back to the levels that.
We probably had in the past if you know what I mean, so that's why we broke it down like this and said you know we're very confident that the new products that we have the new product offering as.
That is where the growth is coming from but.
Let's put it that way.
Yeah.
And on that for for gross margin purposes to get a little color on that.
The new products.
Especially the software and the IP licensing carries very high gross margin. So we're actually fine with them without being a bigger percentage of revenue and continuing to sort of drive us into that vision, we have for future gross margins that we've talked about.
So you see your to your Q2 guidance on gross margin.
Should that be the baseline in the second half.
That we should model.
I think I think if I were to model I would say that the mid range of 65 to 68 days the number I would model.
I think we're not going to go I think we're gonna go try to shoot for higher for sure. You know my goal is to get gross margin more than 70%. This is Brian .
And I would say modeling and it makes sense at this level 67 68.
Okay. Thank.
Thank you guys I appreciate the time sure. Thanks Rick.
As a reminder, if you 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 queue.
Our next question comes from the line of Martin Yang with Oppenheimer. Please proceed with your question.
Hi, Brian and the lives. Thank you for taking my question first question is.
Our new VP of worldwide sales.
Can you maybe talk about you know.
How are you doing things differently that got the positive traction and what his priorities will be.
This year, our medium term.
Okay.
Yeah. So firstly as I said earlier Owen has been with the company for some time so he's from a product knowledge point of view and how we go to market. The right way I think he's been a key part of sort of how we've formed the business model and the go to market strategy. So he is very in tune with that as far as how would you do anything differently I'd say.
He's really taking the approach that's been successful for him.
In our Europe , and U S and sort of brought in that.
That level of discipline and method to the other regions.
Now that they report directly to him.
Okay.
And what about his priorities.
Oh priorities are very clear.
Revenue I saw it yesterday.
With a obviously a focus on especially if you think about the supply chain constraints, taking advantage of the of the inventory that we have today are things in web. So we're not having to get purchase orders for 52 week lead times like some of our competitors are and where you can sell what we have today and what we can ship.
And then on the IP side.
Definitely focusing on process nodes that we have today as an example versus what we could have in the future, obviously, well, we'll add to that if if he lands customers that want a different process nodes. Because this trial supports that but really a clear focus on selling whats available today and pipeline expansion.
You know, we want to get to 20 million in revenue this year and I want to grow 50% next year. So that means you need a strong pipeline in place this year and he has a lot of metro singles for himself and his team.
To go off and do that.
Got it thank you.
And since most visits development update.
Is there any way we could you could give us a sense of scale of how big since most can be in the next 12 to 24 months.
That's a good question.
I'm going to look to Elias to give you. Some some thoughts on that and then again I cannot color later.
Yeah, I would say the the the sensible.
Martin a sensible numbers are really right now.
I'm not as high as anybody would like them to be okay.
But let's put it this way as Brian said in his remarks.
Sensible has a lot of irons in the fire and we are very very close to the inflection point I would call. It where we will start seeing some benefits a leap from this from this subsidiary rehab.
So you know it's it's it's hard to model. It I know, but you know for now I would I wouldn't model anything where it's significantly higher than what we have said in the past, which is usually probably under.
It could be anywhere between you know half a million maybe a best for now but it it has a lot of potential to fly.
Yeah, especially with the fact that we just talked about that six digit deal closed right now for this year and the expansion opportunities there.
I know in fact, there are a lot of other customers that are like this that six digit customer we closed and I know that sensor most focused getting back to your priorities topic is about expanding into very similar.
Types of customers at the same strategy there so.
I'm, probably a little bit more bullish that we'll get more than the several hundred thousand in molasses just mentioned any maybe are somewhere between three and five extra sales from last year.
But let's see let's see how the how fast we can expand beyond this are the six digit win that we just talked about.
So that's.
That's good to know Oh. Thank you I appreciate your insight on last question from me is on display bridge attraction.
Is it large enough to offset the weakness of smartphone customer worse or is it maybe a little bit bigger.
Oh, it's bigger than the offset of the smartphone customer weakness for sure.
Yeah.
Got it. Thank you that's one.
Thanks Martin.
And our next question comes from the line of Richard Shannon with Craig Hallum. Please proceed with your question.
Well, thanks, Brian and I'll ask for taking my questions.
It was our first one.
First one for me is on the on the breakeven commentary I think you said profitability around the middle of the year since your guidance for this quarter. It doesn't include that anywhere I'm, assuming that's an assumption or a strong belief with the third quarter or are you, suggesting that with a potential upside you could even see it in a second.
If I if I, if I would I guess I would say is a potential we could see at a breakeven in Q2, there is a potential.
Guaranteed, but there's a high potential profitability Q3, yes.
But there could be upsides that we were not aware off Richard.
That Oh, we are aware off and we just don't want to talk about it right now, but we are pretty sure that we are going to get to profitability.
Okay fair enough thanks for their lives.
Maybe stepping back and stepping back to the sensible topic here just brought up here, especially around this this deal. It's a it was a six figure deal maybe Brian if you can talk about the environments under which that happened how long. This deal was in place you know how much bigger than other deals have you had.
Far and how do you extrapolate the win you know like either targeting customer types or or whatever that helps you maybe get more of those in the near term.
Yeah, I think this deal.
Started in serious discussion forum at the very end of last year.
And we pushed it forward from there obviously, there's lots of back and forth and legal discussions to get things over the goal line.
But if it happens and like I said earlier there are several other customers that are very similar to this customer.
In terms of end product and how they go to market.
So we're we're pretty bullish that we'll get to a rinse and repeat this process now that we've gone through it at one time and capture some of these other customers for this year as.
As far as.
More details beyond that I'm going to.
Just mentioned that we have an NDA with this customer were not supposed to talk about a lot of details.
Given the nature of it but no.
More will come out publicly over time.
I think the bottom I know that I want to emphasize is that.
It's a substantial increase in the revenue immediate revenue and potential revenue than any other customer that sensible has brought.
To this stage within quick logic and the second is that this is not a one off.
[noise] type customer with a very unique use case. This is something as I said I think there's as rents and repeatable with other customers.
The last thing I'll say is that some of the AI.
AI is new for a lot of people and a lot of times they get they want to use AI software, but they also need data science health.
And of course, we charge for any of that that helped.
But I think this customer the one thing I really like about it is I think it's going to give us scale to so many follow on deals within this one customer both SaaS.
SaaS and royalty and I don't think we're gonna have to be doing a lot of data data science helped us as part of that which is great because that means that we can scale. This is a platform faster.
So theres a lot of things I like about this this first win that we can that we can go and repeat.
Yeah.
Okay perfect. Thanks for that detail Brian .
Let's see here, maybe a question following up on the topic of chip lifts, you're actually probably a few questions within this topic.
My first one is if you think about chip lets says the driving force here versus other opportunities with it.
How big do you see the triplet opportunity being and then also kind of tangentially here you know most.
Most of the nodes you've talked about before today have been large yet 22 nanometers and you just mentioned.
Seeing stuff below 10 nanometers, I guess I'd love to understand the competitive dynamics here is I think there's some other companies that focus more on the leading edge and how you're competing relative to those guys in that space.
Yes.
Yeah, there's probably three questions in that one question. So if I don't answer when just remind all right.
Alright.
The so firstly on the market side, I think and I think I've been clear about this.
With investors as well as internally, but.
Our goal is obviously near term revenue growth and that comes from things that we have today, which are process nodes that we have available today with IP all the 'twenty two 'twenty X nodes.
And the ones that are a little bit larger than that so the focus is on that for sure for the near term revenue.
The point at which we would do a chill plate, obviously, a triplet as a part of a bigger system.
But you start to design the triplet and triplets are gonna take you know a year or to get to the point at which your sampling is with the supply chain constraints. Obviously your cycle times are out there longer now so that's like a year plus to get to the revenue point. So I like chip looks from a revenue growth driver in the maybe like the two year horizon, but not us.
And near term growth driver in the near term growth driver is very much focused on IP that we can get a front end licenses for.
Back end royalties after and then yes, we're working with customers to get a customer driven triplet are done. So we can be the storefront for that getting revenues from the actual chip with you know at some point in the future to be clear also.
The point at which we might actually trigger the large investment for the chip they would be the point, where we have customer funding for that we're not going out on their own to do this with her own dime. This is gonna be driven from collaboration with customers, where they're trying to take the money and investment to go off and do that.
Now getting to the competitive landscape.
That's a very interesting question because you can say well you have E.
E. S. P. J I think competitors you have discrete FPGA competitors, you have triplet competitors and all of that is true. So how are we different from all of those firstly I think there's only one company actually that has tripled its F. P. J as an IP under the same umbrella.
And that company is a chronic so it can be we can be public about that right.
I think the unique thing that I like about how we're positioned versus somebody like in a chronic <unk>.
Is that they from what I can see they do IP.
Four knows that they're gonna do chips on and triplets on and that's it they don't have like a real what I would call an IP strategy, which is to really have the ability to go off and license for any process node and in foundry.
And you see that we actually do have that strategy with what Astellas has done and all of these recent IP licenses, we've talked about and contracts are in fact for process nodes that we do not have chips that we run on today. So it's a it's a very purposeful IP strategy.
Now, we're going to layer onto that the fact that we can do chip listen via the storefront for that which again that being able to be a storefront for chip sale is actually different than some of the pure play E. FPGA competitors that you've undoubtedly seen at some of the trade shows out here that don't have a actual chip strategy. It's really just the IP. So.
Again, I come back to U S. P J user tools when customers and partners get.
Trained up and familiar with user tools you'd like to stick with that it's like us on this call and nobody wants to switch from Mac OS the windows, if you've been doing that your you know the last 20 years, so that software becomes sticky and as you get sticky than whether or not you need a triplet or an IP for an ASIC or discrete FPGA undoubtedly your engineering team will prefer to use the.
Same vendors tools, which by default would drive a different revenue opportunities for us So I like where we're doing things differently I like the fact that it's driven from open source, we have all the automation and scalability with Astellas and it has unique against any of the competitors that I just mentioned did.
Did I cover all your questions or did I forget one.
I think you've got hurt them, all and then some Brian I appreciate all that detail that's great stuff I think I've asked you. This in more than one of the past earnings calls but.
Given the excitement that you have an embedded FPGA wonder if you could just kind of profile to characterize the pipeline overall for bad debt T J.
Compare it to past dynamics any way that you can characterize the size of the potential growth rate here I guess, both in terms of licenses and then eventually royalties as they layer in.
Well I've already talked about it I think tens of millions of dollars and so the next level up would be hundreds and I'm not ready to go that far yet still tens of millions, but what I do like about it is that were really what I'm actually surprised about is that we've built this strategy. The development strategy such that we could license something for a couple of hundred K and.
Money.
But what we're seeing is we're seeing a lot of value more than what we anticipated reaching into the seven digits in a lot of cases and so the diversity of the funnel is high a lot of it is on higher value IP people driving us to nodes, we just havent announced before which are more aggressive in nature and carry a higher value.
And so we're able to address those and I love, where we are with the funnel and again I think the fact with one being the sales leader now he can drive a lot of this with his experience and that the.
Programmable logic industry in general more broadly outside of the U S and Europe and capture a lot of that opportunity.
I really like where we are with the funnel and it is larger than it was the last time, we talked.
I haven't given the exact number but it's it's still in the tens of millions and growing.
Okay Fair enough I appreciate all the detail Brian that's all for me. Thanks.
Thank you Richard.
Yeah.
Thank you at this time, we have reached the end of the question and answer session. I will now turn the call back over to Brian for any closing remarks.
Yeah.
I wanted to thank everybody for participating in today's call and continued support we look forward to speaking with many of you again, when we participate in upcoming investor events and when we report our second quarter of fiscal year 2022 results in August have a good day. Thank you.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great day.
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