Q4 2023 QuickLogic Corp Earnings Call

Operator: Ladies and gentlemen, thank you for your patience. The conference will begin momentarily. Again, thank you, www.quicklogic.com www.quicklogic.com www.quicklogic.com and QuickLogic. Thanks for watching, www.

Ladies and gentlemen, thank you for your patience the conference will begin momentarily again, thank you for your patience.

[music].

Speaker: QuickLogic.com www.quicklogic.com www.quicklogic.com www.quicklogic.com, and I'm going to be talking about the new QuickLogic API. So, let's get started.

Speaker: So, I'm going to be talking about the new QuickLogic API. So, this is a new API. So, it's a new API. www.quicklogic.com Bye!

Operator: QuickLogic.com and www.quicklogic.com Transcribed by https://otter.ai, www.quicklogic.com, Greetings. At this time, I would like to welcome everyone to QuickLogic Corporation's fourth quarter and fiscal 2023 earnings results conference call. As a reminder, today's call is being recorded. I would now like to turn the conference over to Ms. Allison Ziegler of Darrow Associates. Ms. Ziegler, please go ahead.

Allison Ziegler: Thank you, Operator, and thanks to all of you for joining us. Our speakers today are Brian Faith, President and Chief Executive Officer, and Elias Nader, Senior Vice President and Chief Financial Officer. As a reminder, some of the comments QuickLogic makes today are forward-looking statements that involve risks and uncertainties, including but not limited to stated expectations relating to revenue from new and mature products, statements pertaining to QuickLogic's future performance, design activity, and its ability to convert new design opportunities into production shipments, timing and market acceptance of its customers' products, scheduled changes and production start dates that could impact the timing of shipments, the company's future evaluation systems For more detailed discussions of the risks, uncertainties, and assumptions that could result in those differences, please refer to the risk factors discussed in QuickLogic's most recently filed periodic reports with the SEC.

Greetings.

At this time I would like to welcome everyone to quick larger corporations fourth quarter and fiscal 2023 earnings results Conference call.

As a reminder, today's call is being recorded.

I would now like to turn the conference over to MS. Alison Ziegler of Darrow Associates particular, please go ahead.

Thank you operator, and thanks to all of you for joining us our speakers today are Brian Faith, President and Chief Executive Officer, and Elias Nader Senior Vice President and Chief Financial Officer. As a reminder, some of the comments quick logic makes today are forward looking statements that involve risks and uncertainties, including but not limited to stated.

Patients relating to revenue from new and mature products statements pertaining to quick logics future performance design activity and its ability to convert new design opportunities into production shipments tie.

Allison Ziegler: QuickLogic assumes no obligation to update any forward-looking statements or information, which speak as of the respective date of any new information or future event. 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. Allison.

Timing and market acceptance of its customers' products schedule changes in production start dates that could impact the timing of shipments.

Company's future evaluation systems broadening the number of our ecosystem partners unexpected result, 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 FCC like logic assumes no obligation to update any forward looking statements or information which speak.

Allison Ziegler: We have also posted an updated financial table on our IR web page that provides current and historical non-GAAP data. Please note QuickLogic uses its website, the company blog, corporate Twitter account, Facebook page, and LinkedIn page as channels of distribution of information about its business. Some such information may be material team information, and QuickLogic may use these channels to comply with its disclosure obligations under Reg FD. A copy of the prepared remarks made on today's call will be posted on QuickLogic's IR web page shortly after the conclusion of today's earnings call. I would now like to turn the call over to Brian. Go ahead, Brian.

As of the respective date 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.

Okay.

We have also.

Allison.

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 from them.

Brian Faith: Thank you, Allison. Good afternoon, everyone, and thank you all for joining our fourth quarter fiscal 2023 conference call. Q4 revenue increased 83% year-over-year to $7.5 million. This growth was driven by record high IP revenue; full year revenue increased 31% to $21.2 million. New products represented 86% of total revenue in 2023, up from 72% of total revenue in 2022. We believe the percentage of new product revenue, which is driven mostly by IP contracts, will increase again in 2024. We set several new all-time records for QuickLogic in 2023.

Such information may be deemed material information.

Quick logic may use these channels to comply with its disclosure obligations under Reg FD.

A copy of the prepared remarks made on today's call will be posted on 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 go ahead, Brian.

Thank you Alison and good afternoon, everyone and thank you all for joining our fourth quarter fiscal 2023 conference call.

Q4 revenue increased 83% year over year to $7 5 million.

This growth was driven by record high IP revenue.

Full year revenue increased 31% to $21 2 million.

New products represented 86% of total revenue in 2023 up from 72% and total revenue in 2022.

Brian Faith: These include new quarterly records for non-GAAP operating profits and Nongap Net Profit set in Q4 and for the full year. We also set new records for non-GAAP operating margin and non-GAAP net profit margin. Based on our outlook for greater than 30% revenue growth in 2024, which is well supported by our record $168 million opportunity funnel, we anticipate eclipsing those records this year. The short story here is that the IP business model we launched in 2020 is delivering strong results. Over the last three years, we have delivered top-line growth of 146%, increased our non-GAAP gross profit dollars by over 230%, and with a modest decrease in non-GAAP operating expenses, improved our operating leverage by over 250%. With this performance, a profitable year now under our belt, and an outlook for continued growth driven mostly by new IP customers, I think it's fair to say our new IP business model has developed solid traction. Let Last August, we announced the award of the second phase of our government contract that has a total potential of $72 million.

We believe the percentage of new product revenue, which is driven mostly by P contracts will increase again in 2024.

We set several new all time records for quick project in 2023.

This includes new quarterly records for non-GAAP operating profit.

non-GAAP net profit in Q4 and for the full year.

We also set new records for non-GAAP operating margin and non-GAAP net profit margin.

Based on our I'll look for greater than 30% revenue growth in 'twenty 'twenty, four which is well supported by a record $168 million opportunity funnel, we anticipate eclipsing does records this year.

The short story here is the IP business model, we launched in 2020 is delivering strong results.

Over the last three years, we have delivered a topline growth of 146%.

We increased our non-GAAP gross profit dollars by over 230%.

And with a modest decrease in non-GAAP operating expenses.

Proved our operating leverage by over 250%.

With this performance a profitable year now under our belt.

And then I'll look for continued growth driven mostly by new IP customers I think it's fair to say.

Brian Faith: This phase added Honeywell Aerospace as a foundry partner and increased the funding from Phase 1 levels to bring Honeywell up to speed quickly. Phase two also funded our continued activity with SkyWater technology. In our growth projections for 2024, we are modeling a return to the funding rate of Phase 1 for the next phase of this contract. This outlook may prove to be conservative, but providing conservative projections is our goal, while we are highly confident of achieving our 30% plus revenue growth objective in 2024. The timing and cadence of large IP contracts and a strategic shift in how we allocate revenue between engineering services and IP will push the recognition of certain revenue into the second half of 2024. It is important to note this shift in allocation does not impact or delay our cash flow from IP contracts; cash flow from IP contracts will remain as it has been in recent years.

Our new IP business model has developed a solid traction.

Let's take a few minutes now to update the status for some of our major contracts.

Last August we announced the award of the second phase of our government contract that has a total potential of $72 million.

This phase added Honeywell aerospace as a foundry partner and increase their funding from phase one levels to bring Honeywell up to speed quickly.

Phase two also funded our continued activity U S sky water technologies.

And our growth projections for 2024, we are modeling a return to the funding rate of phase one for the next phase of this contract.

This outlook may prove to be conservative, but providing conservative projections is our goal.

While we are highly confident of achieving our 30% plus revenue growth objective in 2024.

The timing and cadence of large IP contracts and a strategic shift in how we allocate revenue between engineering services and IP well pushed the recognition of certain revenue into the second half of 'twenty 'twenty four.

It is important to note this shifting allocation does not impact or delay our cash flow from IP contracts.

Brian Faith: This shift simply better aligns revenue with the value of our deliverables and improves our ability to effectively negotiate and win future contracts. Beyond building on the success of our large government contract, we're very well positioned to significantly expand our IP business across many new customers and market sectors, as well as the number of fabrication nodes supported by our IP in 2024. During the first two months of 2024, we have already booked one significant contract with a new IP customer and believe we will have a second one booked later this week. These two contracts, and others we believe we will book in the coming months, will contribute to cash flow throughout 2024. However, revenue will not be recognized on our income statement until the second half of the year. I would like to provide a little more color on both of these designs.

Cash flow from IP contracts will remain as it has been in past years.

This shifts simply better aligns revenue with the value of our deliverables and improves our ability to effectively negotiate and win future contracts.

Beyond building on the success of our large government contract, we are very well positioned to significantly expand our IP business across many new customers and market sectors.

As well as the number of fabrication node supported by our IP in 2024.

During the first two months of 'twenty 'twenty four we have already booked one significant contract with a new I P customer.

I believe we will have a second one but later this week.

These two contracts and others. We believe we will book in the coming months will contribute to cash flow throughout 2024.

However, revenue will not be recognized on our income statement until the second half of the year.

Brian Faith: The first new contract that we finalized already this year is exciting, and we believe it is indicative of forward design trends that favor the incorporation of EFPGA technology. I cannot go into as much detail on this design, but I can share it is a new defense industrial-based customer, and the application is not related to our large government contract. This design will be fabricated by GlobalFoundries on its low-power 12nm process known as 12LP.

I would like to provide a little more color on both of these designs.

The first new contract that we finalized already this year is exciting and we believe indicative of forward design trends that favor the incorporation of E. S. P. G a technology.

I cannot go into as much detail on this design, but I can share. It is a new defense industrial base customer and the application is not related to our large government contract.

Brian Faith: We believe there will be opportunities to expand our engagement with this customer going forward. The second of the contracts is with a large company that I'm sure you would recognize. This design is for a new ultra-low power SOC that is targeting a variety of commercial and industrial IoT applications, as well as aerospace and defense applications outside the U.S.

This design will be fabricated by global foundries audits low power 12 nanometer process known as 12 L. P.

We believe there will be opportunities to expand our engagement with this customer going forward.

The second other contracts is with a large company that I'm sure you would recognize.

This design is for a new ultra low power S. O C that is targeting a variety of commercial and industrial Iot applications as well as aerospace and defense applications outside the U S.

Brian Faith: This design has been referenced in prior calls as government-funded and will be fabricated by TSMC on its 12 nanometer process. Within the SOC, our ESPGA technology is used for AI acceleration, which is a necessary function in most AI applications. We believe this will prove to be a rapidly growing application that is often better served by FPGA technology than a processor running the acceleration algorithms and software. If you'll forgive me for diverging into a little tech talk, I'll briefly explain why this is the case. Acceleration is accomplished by processing data using an algorithm.

Design has been referenced in prior calls is government funded and will be fabricated by TSMC on its 12 nanometer process.

Within the U S O C. R. E. S. P. G. A technology is used for AI acceleration, which is unnecessary function in most AI applications.

We believe this will prove to be a rapidly growing application that is often better search by F. P. G. A technology than a processor running the acceleration algorithms and software.

If you'll forgive me for diverging into other old Tech talk I'll briefly explain why this is the case.

Acceleration is accomplished by processing data using an algorithm because the acceleration is very important and can provide key competitive advantages for our customers. These acceleration algorithms are constantly refined unchanged.

Brian Faith: Because acceleration is very important and can provide key competitive advantages for our customers, these acceleration algorithms are constantly refined and changed. Due to this, the semiconductor device tasked with running the algorithms must be able to adapt to changes in the algorithms. Since it is impossible for a fixed ASIC to adapt to these changes, the only two ways to support the requirement are a processor or programmable logic, which is most commonly accomplished today with FPGA technology. The challenge here is that while these acceleration algorithms can run in a processor, and the processor can be reprogrammed for algorithm changes, processors are inherently slower and consume far more power than pure hardware solutions like FPGAs.

This the semiconductor device tasked with running the algorithms must be able to adapt to changes in the algorithms.

Since it is impossible for a fixed ASIC to adapt to these changes the only two ways to support their requirement or a processor or a programmable logic, which is most commonly accomplished today with FPGA technology.

The challenge here is that while these acceleration algorithms can run at a processor and the processor can be reprogram for algorithm changes processors are inherently slower and consume far more power than a pure hardware solutions like F. P. G H.

Brian Faith: In this particular application, the priority was the lowest possible power consumption, and that is what led the customer to select our ultra-low power EFPGA IP. As AI expands into edge applications, we believe this will be a common application for EFPGAs that we are very well positioned to address. In November 2022, I shared that we had taped out a new device for a customer that incorporates our EFPGA IP. Due to strict confidentiality requirements, I can't share more details on the design beyond a brief update. We continued our work on this design during 2023, and it contributed revenue throughout the year, including Q4. The customer is now working through certain aspects of the design.

In this particular application the priority was the lowest possible power consumption and that is what led the customer to select our ultra low power E. S. P. G. A I P.

As a I expands into edge applications. We believe this will be a common application for E. S. P. G E.

We're very well positioned to address.

In November 2022, I shared that we had taped out a new device, where a customer that incorporates our E. S. P. G. A a P.

Due to strict confidentiality requirements I can't share more details on the design win beyond a brief update.

We continued our work on this design during 2023 and it contributed revenue throughout the year, including Q4 the.

The customer is now working through certain aspects of the design.

Brian Faith: We believe this will take a couple of quarters and that our activity will resume during the second half of 2024. This customer could represent tens of millions of dollars in potential device revenue over the next couple of years. Last September, we announced that a leading technology company chose our EFPGA IP for a design that will be fabricated using GlobalFoundry's 22FDX platform. However, due to strict confidentiality requirements, I cannot go into more detail on the design.

We believe this will take a couple of quarters and that our activity will resume during the second half of 2024.

This customer could represent tens of millions of dollars in potential device revenue starting in a couple of years.

Yeah.

Last September we announced a leading technology company chose our E. S. P. G. A I P for a design that will be fabricated using globalfoundries 22 F D X platform.

Again due to strict confidentiality requirements I cannot go into more detail on the design, but I can share that we are on schedule to deliver our IP during this quarter.

Brian Faith: But I can share that we are on schedule to deliver our IP during this quarter. Last November, we announced that a Global Semiconductor Leader chose our EFPGA IP for a design that will be fabricated on UMC's 22nm platform. We are on schedule to deliver our IP for this design during this Q1. In total, we will be on contract to either deliver or begin development of our IP on six different foundry process technology combinations this quarter. This is up 3x from a year ago, demonstrating that the market demand for EFPGA IP is accelerating and that the automation from our Australis IP generator enables us to address the demand in a scalable way. I continue to be encouraged by the early steps we took to capitalize on the rising chiplet market, and I'm not at all surprised to see it as headline news today. Chiplet architectures enable customers to much more cost effectively incorporate FPGAs into new designs.

Last November we announced a global semiconductor leader chose our E. F. P. G. A I P for a design that will be fabricated on Umc's 22 nanometer platform. We are on schedule to deliver our IP for this design during Q. During this Q1.

In total we will be on contract to either deliver or begin development of our IP on six different foundry process technology combinations this quarter.

This is up three X from a year ago, demonstrating the market demand for E. F. P. G. A a P is accelerating and the automation from our australis a fee generator.

With us to address the demand in a scalable way.

I continue to be encouraged by the early steps, we took to capitalize on the rising chocolate market.

I am not at all surprised to see it is headline news today.

I played architectures to enable customers to much more cost effectively incorporate FPGA into new designs.

Brian Faith: The research firm MarketUS recently released its 10-year forecast projecting the chiplet market will grow from only a few billion dollars in 2023 to $107 billion in 2033. That represents a 10-year CAGR of over 42%, and I believe we are very well positioned to capitalize on this growth. We have several CHIP opportunities in our funnel, including deals with our partner YourCHIP. As a matter of fact, we submitted a proposal to one customer earlier this month and have another on tap that we expect to submit later in the first half. Our lead smartphone customer has worked through its excess inventory of EOS S3, and we resumed shipping during Q4 to support production.

The research firm market U S. Recently released its tenure forecast projecting that shifted market will grow from only a few billion dollars in 2000 $23 billion to $107 billion in 2033.

That represents a 10 year CAGR of over 42% and I believe we are very well positioned to capitalize on this growth.

We have several chip opportunities in our funnel, including deals with our partner York Chet.

As a matter of fact, we submitted a proposal to one customer earlier this month and have.

Another on tap that we expect to submit later in the first half.

I will leave smartphone customer has worked through its excess inventory of E. S. S. Three and we resumed shipping during Q4 to support production.

Brian Faith: We expect the volume to increase in 2024 as our EOS S3 solution is selected for new designs that will ship into 2025. We are also forecasting modest increases in display bridge shipments this year and expect mature product revenue will be similar to what it was in 2023. The private label agreement that SensiMal established last quarter with a leading MCU company is building traction but is not yet delivering revenue. The MCU company has established end customer engagements, and SensiMal has established some notable engagements independently. We are optimistic that these and future engagements will lead to a material increase in SensiMal revenue in 2024. With that, I now turn the call over to Elias for a review of the financial results, and I will rejoin for our closing remarks. Elias, please go ahead. Thank you, Brian. Good afternoon, everyone.

We expect the volume to increase in 'twenty 'twenty four is our E. O S. S. III solution was selected for new designs that will shift into 2025.

We are also forecasting modest increases in display bridge shipments this year and expect mature product revenue will be similar to what it was in 2023.

The private label agreement that sensible established last quarter with a leading MCU company is building traction, but not yet delivering revenue. The M. C. You. The company has established and customer engagements and sensible has established a notable engagements independently. We are optimistic that these and future engagements will lead to.

A material increase in some small revenue in 'twenty 'twenty four.

With that let me now turn the call over to Elias for a review of the financial results and I will rejoin for closing remarks life's. Please go ahead.

Thank you Brian.

And good afternoon, everyone.

Elias N. Nader: Ahem, revenue was slightly above the midpoint of our guidance range and drove record Q4 net income, bringing the full year 2023 to record profitability on a non-gap basis, specifically. Revenue in Q4 was $7.5 million, off 12% from the third quarter and up 83% from the fourth quarter of 2022. Our results benefited from higher EFPGA IP license and professional services revenue with another full quarter of the second phase of the large EFPGA contract as well as higher smart connectivity and sensor product revenue. Within our Q4 revenue, sales of new products were approximately 6.8 million. This compares to $6.1 million last quarter of 12% and $2.8 million in the fourth quarter of 2022 of 140%. Mature product revenue was approximately $0.7 million, an increase of 15% from $0.6 million last quarter, although down from $1.2 million in Q4 last year. Non-GAAP gross margin in Q4 was 78.3% compared with 78% in the third quarter of 2023 and 53.2% in the fourth quarter of 2022.

Revenue was slightly above the midpoint of our guidance range.

Drove record Q4, net income, bringing the full year 2023 to record profitability on a non-GAAP basis.

Specifically.

Revenue in Q4 was $7 5 million.

Off 12% from the third quarter and up 83% from the fourth quarter of 2022.

Our results benefited from higher E F. P. G. A I P license.

And professional services revenue.

Another full quarter of the second phase of the large FPGA contract.

Well as highest smart connectivity and sensor product revenue.

Well, they're not Q4 revenue.

Sales of your products were approximately $6 8 million.

This compares to $6 1 million last quarter.

Up 12% and $2 8 million in the fourth quarter of 'twenty tried to 440%.

Mature product revenue was approximately 0.7 million.

An increase of 15% from 0.6 million last quarter.

Though down from $1 2 million in Q4 last year.

non-GAAP gross margin in Q4 was 78, 3% compared with 78%.

In the third quarter of 2023.

53, 2% in the fourth quarter of 2022.

Elias N. Nader: The strong gross margins in the last two quarters resulted from the higher revenue level and a change in the mix of deliverables, with EFPGA revenue related revenue to a higher percentage of professional services revenue, as well as continued cost controls. Our non-GAAP operating expenses in Q4-23 were approximately $3.1 million. This compares with non-GAAP operating expenses of $3.3 million last quarter and $2.4 million in the fourth quarter a year ago. Non-GAAP operating expenses were lower than our outlook due to the timing of certain payments and the classification of certain professional services to COGS. Non-GAAP net income was a record $2.6 million, or $0.18 for diluted shells.

The strong gross margin in the last two quarters resulted from the higher revenue level.

And the mix of deliverables.

Within E F P J related revenue, so a higher percentage.

<unk> professional services as well as continued cost controls.

Our non-GAAP operating expenses in Q4, 23 were approximately $3 1 million.

This compares with non-GAAP operating expenses of $3 3 million last quarter.

$2 4 million in the fourth quarter a year ago.

non-GAAP operating expenses were lower than our outlook due to the timing of certain payments.

And the classification of certain professional services to Cogs.

non-GAAP net income was a record $2 6 million.

Oh, a T cell <unk> 18 cents per diluted shares.

Elias N. Nader: This compares to a non-GAAP net income of $1.8 million, or $0.13 per share, last quarter, and a non-GAAP net loss of $544,000, or $0.04 per share, in the fourth quarter of fiscal 2022. Now, turning to the full year fiscal 2023 results. Total revenue was $21.2 million, up 31% from $16.2 million in fiscal 2022. New product revenue was $18.2 million compared to $11.7 million in the prior year.

This compares to a non-GAAP net income of $4 8 million or 13 cents per share last quarter and a non-GAAP net loss of 544004 cents per share in the fourth quarter of fiscal 'twenty to 'twenty two.

Yes.

Now turning to the full year fiscal 2022 results.

Total revenue was $21 2 billion up 31% from $16 2 million in fiscal 2020 two.

New product revenue was $18 2 million compared to $11 7 million in the prior year.

Elias N. Nader: The increase was primarily driven by higher EFPGA IP and professional services revenue, which offset decreases in smart connectivity and EOS S3 revenue caused by customers digesting excess inventory. As Brian noted, we saw some rebound in new silicon revenue during Q4 and expect the strength to continue during 2024. Mature product revenue was $3 million, compared to 4.5 million in fiscal 2022.

The increase was primarily driven by higher FPGA IP.

And professional services.

That's offset decreases in smart connectivity.

E O S T revenue.

By customers digesting excess inventory.

As Brian noted we saw some rebound in use silicon revenue during Q4 and expect this trend to continue during 2024.

Mature product revenue was 3 million.

Compared to $4 5 million in fiscal 'twenty to 'twenty two.

Elias N. Nader: We anticipate mature product revenue in 2024 will be similar to 2023. For the full fiscal year 2023, we had one customer that accounted for 10% or more of our revenue. Non-GAAP gross margin for 2023 was 69.8%, compared to 56.1% in 2022.

We anticipate mature product revenue in 'twenty 'twenty four will be similar to 2023.

For the full fiscal year 'twenty, three we had one customer that accounted for 10% or more of our revenue.

Okay.

non-GAAP gross margin for 'twenty three was 69, 8%.

Go back to 56, 1% in 'twenty to 'twenty two.

Elias N. Nader: The year-over-year increase was primarily due to the higher revenue level, a change in the mix of deliverables, the capitalization of certain long-lived investments, and continued cost controls. And while revenue was up 31% from the prior year, non-GAAP operating expenses increased approximately 13%, to $12.2 million from $10.8 million in 2022, as we continue to maintain effective expense controls. The combination of strong revenue growth and controlled operating expenses translated into a record non-GAAP net income of $2.3 million, or $0.17 per share, compared to a non-GAAP net loss of $2.2 billion in 2022. Total cash at the end of 2023 was $24.6 million, compared with $19.2 million at year-end 2022.

The year over year increase.

It was primarily due to the higher revenue level.

Change in the mix of deliverables.

Capitalization of such a long long lived investments and continued cost controls.

And while revenue was up 31% from the prior year.

non-GAAP operating expenses increased approximately 13%.

$12 2 million.

$10 8 million in 2022.

As we continue to maintain effective expense control.

The combination of strong revenue growth and controlled operating expenses.

That's a record non-GAAP net income of $2 3 million.

<unk> 17 cents per share compared to a non-GAAP net loss of $2 2 billion in 'twenty to 'twenty two.

Total cash at the end of 2020 three was $24 6 million.

Compared with $19 2 million at year end 'twenty to 'twenty two.

Elias N. Nader: This is inclusive of a newly amended and restated credit facility that was increased from $15 million to $20 million and extended to the end of 2025. Now moving to our guidance for the first quarter of fiscal 2024, which will end on March 31, 2024. Revenue guidance for Q1 2024 is approximately $6.2 million, plus or minus 10%, which is up 50% over Q1 2023. First quarter revenue is expected to be comprised of approximately 5.1 million of new products, which is a year-over-year increase of 67%, and 1.1 million of Paltrow products, which is essentially flat with last year. The sequential revenue decline from Q4 2023 is due to the timing and cadence of large IP contracts and a strategic shift that allocates a high percentage of contract revenue to IP versus engineering services to better align with the value of a deliverable.

This is inclusive of our newly amended understand that credit facility.

Was increased from 15 million to 20 million.

And extended till the end of 'twenty to 'twenty five.

Net cash increased by approximately one $1 million sequentially.

Now moving to our guidance for the first quarter of fiscal 'twenty 'twenty, four which will end on March 31 2024.

Revenue guidance for Q1, 'twenty 'twenty four is approximately $6 2 million.

Somebody less 10%.

Which is up 50% over Q1 2023.

First quarter revenues are expected to be comprised of approximately $5 1 billion of new products.

Which is a year over year increase of 67%.

On the $1 1 million sub products, which is essentially flat with last year.

Yeah.

The sequential revenue decline from Q4 'twenty to 'twenty three.

This is due to the timing and cadence of large IP contracts.

This strategic shift that allocates a high percentage of contract revenue to IP.

It's just engineering services.

Better aligned with the value of our deliverables.

Elias N. Nader: While this will result in shifting certain revenue recognition in the second half of the year, it is not expected to impact the timing of cash flow from these countries. For the full year 2024, we expect to grow revenue by more than 30% and generate positive cash flow, based on the anticipated Q1 revenue mix. Non-GAAP gross margin for the quarter is expected to be approximately 70 percent, plus or minus five percentage points.

While this would result in shifting certain revenue recognition in the second half of the year.

It is not expected to impact the timing of cash flow from these contracts.

For the full year 'twenty 'twenty, four we expect to grow revenue by more than 30%.

And generate positive cash flow.

Based on the anticipated Q1 revenue mix non-GAAP gross margin for the quarter is expected to be approximately 70% plus or minus five percentage points.

Elias N. Nader: Our non-GAAP operating expenses will be approximately $3.5 million, plus or minus 10%. We believe quarterly non-GAAP OPEX will remain in the $3.5 million range this year with equational increases to support new programs. Please keep in mind that given our industry, we may be required to reclassify certain expenses to COGS or capitalize certain costs at times. The reclassifications are mainly related to labor and tooling for our revenue contracts with customers. Capitalization will reduce OPEX and change the timing for recognizing the corresponding expenses in COG.

Our non-GAAP operating expenses were approximately $3 $5 million plus or minus 10%.

We believe quarterly non-GAAP Opex will remain in the three 5 million range. This year with a question on the increases to support new programs.

Yeah.

Please keep in mind that given our industry, we may be required to reclassify certain expenses to Cogs.

Capitalized certain costs at times.

The reclassifications.

Mainly related to labor and tooling for our revenue contracts with customers.

Capitalization reduced opex unchanged your timing for recognizing that the corresponding expenses in Cogs.

Elias N. Nader: This may cause variability in gross margins and operating results. With these variables in mind, we believe our full-year 2024 non-GAAP gross profit margin will be in the upper 60% range. After interest, other income, and taxes, we currently forecast that our Q1 non-GAAP net income will be approximately $0.5 million to $1.1 million, or $0.03 to $0.08 per share, based on roughly 14.4 million fully diluted shares. We believe we're well positioned to deliver strong profitability for the full year 2024. The difference between GAAP and non-GAAP results is related to non-cash, stock-based compensation expenses.

This may cause variability in gross margins and operating results.

These variables in mind, we believe our full year 2024, non-GAAP gross profit margin would be in the upper 60% range.

After interest other income and taxes. We currently forecast Q1, non-GAAP net income will be approximately 0.5 billion to $1 1 million.

Three cents per.

For sure based on roughly $14 4 million fully diluted shares.

We believe we are well positioned to deliver a strong profitability for the full year 'twenty 'twenty four.

The diff the difference between our GAAP and non-GAAP results is related to noncash stock based compensation expenses.

Elias N. Nader: In Q1, we expect this composition to be approximately 0.7 million. As a reminder, there will be movement in stock-based compensation during the year, and it may vary each quarter based on the timing of grants and employees. With investments this quarter to support the new design wins that we have discussed, including hiring critical engineering and sales roles, and the timing of certain payments, at the midpoint, we expect cash usage to be less than $1 million in Q1. These investments are in anticipation of continued strong growth in 2024 and are timed to the signing of new contracts for the design window. As I noted earlier, we are on track to be cash flow positive for the full year 2024. Thank you very much.

In Q1, we expect this compensation would be approximate Ts Europe, one 7 million.

As a reminder, there will be movement in our stock based compensation during the year.

That may vary each quarter based on the timing of Grand Central Aes.

With investments this quarter to support the new design wins that we have discussed including the hiring critical engineering and sales roles.

Timing of such payments at the midpoint, we expect cash usage to be less than $1 million in Q1.

These investments in anticipation of continued strong growth in 2024.

At that time to the signing of new contracts for design wins.

As I noted earlier, we are on track to be cash flow positive for the full year 'twenty 'twenty four.

Thank you very much with that let me now turn the call back over to Brian for his closing remarks.

Brian Faith: With that, I now turn the call back over to Brian for his closing remarks. Thank you, Elias. The amazing team I get to work with every day has driven the development of a successful, profitable, and high growth IP business model in only three years. Thank you all for your hard work and dedication. We have also maintained our core capabilities as a silicon supplier that we will more fully leverage in our storefront and other device-oriented strategies going forward. This ability to provide turnkey solutions for our IP customers sets us apart from our competition since launching our IP business model in 2020. We've grown non-GAAP gross profit dollars by over 230%, and with a modest reduction in non-GAAP OPEX, our operating leverage has increased by a remarkable 251%. While this performance marks a great turnaround story, I think the best is yet to come.

Thank you Elias.

The amazing team I got to work with every day as in only three years driven the development of a successful profitable and high growth IP business model. Thank.

Thank you all for your hard work and dedication.

We have also maintained our core capabilities as a silicon supplier that we will more fully leverage in our storefront another device oriented strategies going forward.

This ability to provide turnkey solutions for our customers sets us apart from our competition.

Since launching our IP business model in 2020.

We have grown non-GAAP gross profit dollars by over 230%.

And with a modest reduction in non-GAAP opex or operating leverage has increased by a remarkable 251%.

While this performance marks a great turnaround story I think the best is yet to come.

Brian Faith: We exited 2023 with not only solid traction but also momentum. We have already booked one significant contract with a new IP customer and have a second to be booked later this week. We have also realized net funnel growth to a record $168 million. This is a sterling example of the old adage that success breeds success.

We exited 2023 was not only solid traction but also momentum.

We have already booked one significant contract with a new IP customer and have a second to be booked later this week.

We have also realized in that funnel growth to a record $168 million.

This is a Sterling example of the old adage that success breeds success as new bookings grow so do new opportunities.

Brian Faith: As new bookings grow, so do new opportunities. While we expect 2024 to be a year of strong growth, profitability, and positive cash flow that is driven mostly by new IP customers, we also believe that royalty and storefront revenue will soon be visible on the horizon to accelerate our growth in future years. With that, I would like to open the call for questions and QuickLogic. Ladies and gentlemen, at this time, if you would like to ask a question, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is open. You may press star 2 if you would like to remove your question; participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Well, we expect 2024 will be a year of strong growth profitability and positive cash flow that is driven mostly by new IP customers. We also believe that royalty in store for our revenue will soon be visible on the horizon to accelerate our growth in future years.

With that I would like to open the call for questions.

Yeah.

Ladies and gentlemen at this time, if you'd like to ask a question. Please press star one on your telephone keypad and a confirmation tone will indicate your line is in the question queue.

You May press Star two if you really like to remove your question from the queue for.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Operator: And our first question comes from Rick Neaton with Rivershore Investment. Thank you, and good afternoon, Brian and Elias. My first question is, and congratulations on a profitable 2023. In looking at how your revenue is going to be second half weighted this year, revenue recognition as opposed to cash flow, what percentages would you put on that, 40-60, 45-55?

And our first question comes from the line of Rick Newton with River Shore investment Research. Please proceed.

Thank you.

And good afternoon, Brian and Elias.

My first question is.

Congratulations on a profitable 2023.

And looking at how your revenue is going to be second half weighted this year. The revenue recognition is close to the cash flow.

What percentages would you put on that 40, 60, 45 55, how in general.

Brian Faith: How, in general, should we look at it? You mean second half to first half as a percentage of total? Yes. Um, Well, greater than 50% will be second half.

Should we look at that.

You mean second half to first half as a percentage of total.

Yes, yes.

You are asking.

Well greater than 50% would be second half weighted.

Brian Faith: I don't think it's going to be as high as 70% or 80% but greater than 50. And, you know, I'll just make a comment here. As we get into more of these larger IP contracts, we are probably more certain of winning something than the actual timing of the contract getting executed. Because, as you can imagine, the larger the contract, the more complicated the contracting process is. And that's why I think we're taking a somewhat conservative approach in how the revenue lays out, in addition to the point that you reinforced about this shift in how we're assigning the value of the contracts between the upfront work versus the IP license that's recognized at the end of the deliverable period. Yeah, more than 50% will be the second half.

I don't think it's gonna be as high as 70% or 80%, but greater than 50.

I'll just make a comment here as we get into more of these larger IP contracts.

We are probably more certain at winning something then the actual timing of the contract getting executed because you can imagine the larger the contract the more complicated the contracting processes.

And that's why I think we're taking a somewhat conservative approach now that revenue lays out in addition to the point that you reinforced on this a shift in how work.

Assigning the value of the contracts between the.

The upfront work versus the IP license that says recognized at the end of the deliverable period.

Yeah, it's more than 50% would be second half I think I'll also add that I think.

Brian Faith: I think I'll also add that, If you look, on an annual basis, quarter, quarter-to-quarter reference, so like Q1 2023, Q1 2024, Q2 2023, Q2 2024, I think we're safely forecasting that every quarter in Q1, or sorry, in 2024 will be greater than the corresponding quarter in 2023. And if you just lay that out on a model, you can see that greater than 50% of the revenue would be in the second half, but also not what I would call a hockey stick either. OK. No, and thanks for that color on that issue.

If you look.

On an annual basis quarter.

Corner to corner reference so that Q1 2023 Q1.

1024, our Q2, 'twenty, sorry, Q2, 'twenty 'twenty four.

We're safely forecasting that every quarter in Q1 or sorry in 'twenty 'twenty four will be greater than the corresponding quarter in two.

2023.

Lay that out in a model you can see that that would be.

Would be greater than 50% of the revenue would be in the second half.

But also not what I would call a hockey stick either.

Okay.

And thanks for that color on that issue the.

Brian Faith: The new contract that you expect to book this week relates back to a customer you've talked about for several quarters, the one at PSM. Is that the one that you referenced could produce tens of millions of dollars of device revenue or chip revenue in a year or two? Is that the final one? different customers, and that's a good thing. We need more shots on goal and more opportunities to engage with IP and potentially convert it to a storefront deal. But now, to be clear, that's a different customer than that one. Okay, thanks for that clarification there. One final question on FPGAs and AI at the edge.

New contract that you expect to book this week relates back to <unk>.

Customer you've talked about for several quarters.

The one at T. S. M is that the one that you referenced could produce tens of millions of dollars of device revenue, our chip revenue in a year or two.

Is that the zone.

So a different customer.

And that's a good okay, but we need more shots on goal and more opportunities to.

Engage with IP and potentially convert it to a storefront deal, but know that to be clear, that's a different customer than that one.

Okay.

Thanks for the clarity there one final question on a.

FPGA and AI at the edge.

Mhm.

Brian Faith: You see that as a growing market. Is that weighted toward the second half of this decade? In other words, as AI rolls out in large supercomputers in data centers right now, with GPUs as accelerators?

You see that as a growing market.

Is that.

Weighted towards the second half of this decade in other words.

Rolls out and large supercomputers in the data centers right now.

With Gpus as accelerators are you seen AI at the edge.

Brian Faith: Are you seeing AI at the edge? more of a 2025 to 2030 narrative, or even starting in the second half of this year. Well, as far as revenue impact to us, I think it's going to start from the second half of this year based on this contract that we're going to be signing here imminently. But they're not alone in discussing that kind of a use case with us. I think a lot of people are trying to figure out why. You know, not everybody wants to use NVIDIA. Everybody is today, but not everybody wants to.

More of a 2025 to 2030 narrative or.

Even starting second half of this year.

But as far as revenue impact to us I think it's gonna be starting from second half of this year based on this contract that we're gonna be signing here imminently.

But they're not alone and discussing that kind of a use case. So that's I think a lot of people are trying to figure out.

Not everybody wants to use Nvidia, everybody yesterday, but not everybody wants to.

Brian Faith: And I think as soon as people can figure out other ways of tackling that problem, FPGA technology being one of those, and then the software stacks associated with that. Once they start figuring that out, then I think you'll see more people using that type of technology. And when I say FPGA, I really should say eFPGA because I think, naturally, people are trying to look at making their own ASICs, take control of their own destiny in that sense. So I think that'll drive future opportunities for us, and the more of these wins that we have today that we can articulate value propositions like that to other people, I think that'll help accelerate that. And then, just to the point about the edge and the data center.

And I think as soon as people can figure out.

The way it is.

Not a problem.

F P J technology being one of those and then the software stacks associated with that.

Once they start figuring that out then I think you'll see more more people using that type of technology.

When I say P. J I really should say E. F. P. J because I think naturally people are trying to look at doing their own asics and take.

Take control excuse me take control of their own destiny in that sense. So I think that will drive future opportunities for us and you know the more of these wins that we have today that we can articulate value propositions like that to other people I think that'll that'll help accelerate that.

And then just sit appointed about the edge in the data center.

Brian Faith: You know, a lot of people are, I think all the press right now is going towards the data center because of all the generative AI grabbing all the headlines. So naturally, what we read and hear about is more on that end of the spectrum, but there's still a fundamental physics problem in how you do some level of inferencing for what I'll call more practical applications at the edge.

You know a lot of people are.

All the press right now is going towards the data center because of all the generative AI grabbing all the headlines.

And so naturally what we read and hear about is more on that end of the spectrum.

But theres still a fundamental physics problem and how you do some level of inferencing for what I'll call more practical applications at the edge and we're seeing people look at FPGA FPGA technology for that and again, that's what drove this soon to be signed contract and I'm sure that company is not alone.

Brian Faith: And we're seeing people look at FPGA and EFPGA technology for that. And again, that's what drove this soon-to-be-signed contract. And I'm sure that company is not alone in being able to use FPGAs for those types of use cases. Thanks for that explanation, Brian, and thank you for letting me ask these questions. Absolutely. Thank you. And our next question comes from the line of Richard Shannon with Craig Hallam. Well, hi, Brian and Elias.

Being able to use that P. J for those types of use cases.

Okay. Thanks for that explanation Brian.

Alright, Thank you for letting me ask these questions.

Absolutely. Thank you.

And our next question comes from the line of Richard Shannon with Craig Hallum. Please proceed.

Well hi, Brian Thanks for taking my questions and I'll add my congratulations on a profitable 2023, a great accomplishment.

Richard Cutts Shannon: Thanks for taking my questions. And I'll add my congratulations on a profitable 2023. Great accomplishment.

Brian Faith: Thank you. Let's see here. A couple things I wanted to touch on here. There were a lot of interesting details you shared here today, Brian, I think. I guess I want to ask about the strategic Red Heart contract, and I wanted to make sure I understood the intent of the comment about returning to a previous run rate for that contract. I'm sure I butchered your language there, Brian, but maybe you could repeat that and explain what that means. I'm going to try to do that in a way that I'm allowed to do that. Let me see the right way to say this.

Thanks Richard.

Lets see here a couple of things I wanted to touch on here a lot of.

The interesting details your share here today, Brian I guess.

I guess I wanted to ask about the strategic Rad hard contract and I wanted to make sure I understood that the intent of the comment about returning to previous run rate of that contract or I'm sure I butchered Your language here, Brian, but maybe you could repeat that and explain what that means.

Yeah.

I'm going to try to do that in a way that I'm allowed to do that.

Okay.

Let me see the right way to say this.

Brian Faith: So right now, we're doing something with two FEPPs, and we're doing a lot of design continually on RH90 and, I'll call it catching up, are accelerating similar-type design on the Honeywell process. Um, I don't know that it's going to continue like that forever, as far as that amount of work and that amount of time on two contracts. And so we're taking a conservative view of what that means for our revenue in this quarter and for the balance of the year, and I would like to think that we are being conservative and that there are opportunities, Hello, to increase that within the same time period. And I really can't go into further details on that, and I hope that you are okay with that sensitivity. I guess I'll have to be okay with it, Brian, but I'm just jonesing to ask a couple more questions about that, but I'll resist the temptation here. I'll only answer what I'm allowed to answer, but nothing more.

So right now we're doing something with two fabs.

Doing a lot of design continually on RH tiny in.

I'll call it catching up.

Our accelerating similar type design on the Honeywell process.

Hmm.

I don't know that its going to continue like that forever as far as.

That amount of work and that amount of time on two foundries.

And so we're taking a conservative view.

What that means for our revenue in this quarter and.

And for the balance of the year.

And I would like to think that we are being conservative and that there is opportunities.

The increase that within the same time period.

And I really can't go into further details on that and I hope that you are.

Okay with that sensitivity.

[laughter], Oh, I guess I'll have to be okay with it Brian but you know I'm just chosen to ask a couple more questions on that but I'll.

I'll resist the temptation here.

So what I'm gonna left.

But nothing more.

Brian Faith: I know you have, but let's hear. You mentioned a couple of contracts here, or one signed and one expected to be signed here shortly, and you used a phrase in response to one of the last questions here about the size of these contracts seemingly growing larger. I mean, obviously, other than the strategic red heart, which is obviously in a zone of its own here, are you generally seeing a trend of larger IP contracts, at least so far this year versus last year and the year before, or am I mixing up your words? I'd say the average that we are seeing is going up.

I know you have been with here. So you mentioned a couple of contracts here or one signed and one expected to be signed here shortly and he made a.

Used a phrase in response to one of the last questions here about the size of these contracts are seemingly growing larger I mean, obviously other than the strategic Rad hard which side, we're seeing it in a zone.

None of it's own here are you generally seeing a trend of larger IP contracts.

So far this year versus last year, and the year before or my mashing up your words here.

So I'd say the average that we are seeing is up.

Brian Faith: And we're going to put a press release out tomorrow morning on the 12 nanometer one that we talked about today on the call. And you'll see a dollar figure, a rough dollar figure, in that press release that we didn't go into on the call. So you'll see that, generally, they're trending up. Yeah. That's a good thing.

And we're gonna put a press release out tomorrow morning on the.

The the 12 nanometer one that's that we talked about.

Today on the call and you'll see a dollar figure a rough dollar figure in that press release that we didn't go into on the call. So you'll see that generally they are trending up.

Yeah.

Brian Faith: I think the more people are starting to appreciate embedded FPGA technology and not just tire kick and experiment with it. I think a lot of them are coming to appreciate the ROI that it gives them, in the sense that if they don't have to go off and re-spin a chip, re-spin a mask, as you get into these more aggressive process technologies, that's a real savings from an NRE perspective. And so if we can attribute some of that savings to the value that we bring, then our prices go up. And so I think there's an appreciation of the value proposition, and also, naturally, as we get more of these advanced process technologies supported. Just by that very fact, you're going to see an uplift in our selling prices and the contract value because they're more expensive notes.

That's a good thing I think the more the more people are starting to appreciate embedded FPGA technology and not just tire kicking experiment with it I think a lot of them are coming to appreciate the <unk>.

Roy that it gives them in the sense that if they don't have to go off and re spent a chip where he spent a mask as you get into these more aggressive process technologies, that's a real savings from.

From an energy perspective.

And so if we can attribute some of that savings to the value that we bring them on.

This does go up and I say, so I think there was an appreciation of the value proposition and also naturally as we get more of these advanced process technologies supported.

By that very fact, youre going to see a uplift in our selling prices and the contract value because they're more expensive notes those projects in general are going to be quite a bit more expensive for the end customer to embark on then something in a lagger technology.

Brian Faith: Those projects, in general, are going to be quite a bit more expensive for the end customer to embark on than something in a laggard technology. So does that mean that the process note is the primary determinant of total cost or value of the contract, then, or just an important factor? It's a marker for it, but it's not the only thing.

So does that mean that the the process node is the primary determinant of total cost or value of the contract and or just a important factor.

It's a marker for it but it's not the only thing I mean, how much logic they need.

Brian Faith: I mean, how much logic they need, how much customization goes into the core that they're wanting from us, and the workflows they're trying to run. All of those are factors that go into how we price the IP. We have to have a starting price book, of course, for things just as a reference.

How much customization goes into the core that they're they're wanting from us to work those theyre trying to run all of those are factors that go into how we priced the I T.

We have to have a starting price book of course for things just as a reference but everything from there because remember our value proposition with australis is that we're agile we can adopt the core to meet the needs of the customer to the workload. It's gonna run so really it's it's not a one size fits all even within our processing.

Brian Faith: But everything from there, because remember, our value proposition with Astralis is that we're agile; we can adapt the core to meet the needs of the customer and the workload it's going to run. So really, it's not a one size fits all, even within a process. And because of that, that impacts the work. It impacts the value and, therefore, the price. And we're big believers in value-based pricing. No two customers have the same price, right?

And because of that that impacts the work it impacts the value and therefore, the price and we're big believers in value based pricing so.

No to customers at the same price, but it all comes down to the value.

Brian Faith: It all comes down to the value of the work together. Okay, let's hear maybe a couple more questions. I'll jump out of line here.

You have to work together.

Right Okay.

This year, maybe a couple of more questions I'll jump out of line here one of your comments, Brian you alluded to.

Brian Faith: One of your comments, Brian, you alluded to, you know, storefront and royalty revenues. I don't think you're referring to or having us expect to see any notable revenues from either of those opportunities this year. So if you could clarify that, and then how do we think about as we get into 25, you know, how could those be, you know, contributory in any way?

Storefront and royalty revenues I don't think you're referring to or are having is expect to see any notable our revenues from either of those opportunities. This year. So if you could clarify that and then how do we think about as we get into 'twenty. Five you know how what could those be contributory in any way and I guess you know since you quantify.

Brian Faith: And I guess, you know, since you've quantified and talked about the potential impact of storefront revenues specifically, could that be a big contributor in calendar 25? I don't know that StarFarm will be a big contributor. I think it'll be..., a contributor. And let's just step back and say, why do we even talk about Skillfront to begin with?

<unk> and talked about the potential impact of storefront revenue, specifically could that be a big contributor in calendar 'twenty five.

I don't know that start from them will be a big contributor I think it'll be.

A contributor.

And let's just step back and say why do we even talk about girlfriends begin about so when we started as a company we started as a <unk>.

Brian Faith: So when we started as a company, we started as a fabulous FPGA company, and all we did was sell devices. So we have all the infrastructure that you would expect a device company to have. We have operations teams, supply chain relationships, everything. Anybody that's been to our office has seen that.

Fabulous FPGA company and always gave us all devices. So we have all the infrastructure that you would expect a device company to have we have operations team supply chain relationships everything anybody that's been their office has seen that.

Hum.

Brian Faith: As we brought the IP business model out, we were able to leverage that infrastructure that we've already invested in because some companies like the notion of IP. They like the idea of making their own device, but maybe they need more than that, especially as FPGA becomes a greater percentage of the total content of their chip. Sometimes, they, I think, prefer to just let an FPGA company do that for them.

As we brought the IP business model out we were able to leverage that infrastructure that we've already invested in them because some companies there.

They like the notion of IP, they like the idea of doing their own device, but maybe they need more than that especially as FPGA becomes a greater percentage of the total content of their chip.

Sometimes they I think prefer to just let an FPGA company do that for them and so that's where we're getting nice synergy by having both of these business models and it is truly a differentiator.

Brian Faith: And so that's where we get nice synergy by having both of these business models. And it is truly a differentiator compared to just an IP company or just an FPGA company. So the work that we're doing within that storefront area, I would say largely is like that upfront IP work. We talked about that customer, that PayPal customer that we've been doing work on even in 2023. Eventually, those things are going to go into production, and when they go into production, then we can start talking about device revenues. I think, as I started answering your question.

Compared to just an IP company or just an FPGA company.

So the work that we're doing within that storefront area.

I would say largely as like that upfront work, we talked about that customer that tape out customer that we've been doing work on even in 2023. Eventually those things are going to go to production and when they go to production and we can do the device revenues.

I think like I started answering your question.

Brian Faith: It'll start in 2025 to some extent, but as far as like becoming a meaningful percent, I think we're modeling beyond 2025 for that. And that's OK if you think like fast forward a couple more years. Then, you know, the end of this government contract is there, and then devices are starting to be available to be designed into real systems. That's when I think we should all expect sort of the step function increase to take place, from the storefront revenue, really kicking it because storefront revenue is gonna far exceed any IP, license, or royalty that we would see for these types of designs, right? Okay, fair enough. I'll ask one more question; jump out of line here.

It'll start in 2020 five to some extent, but as far as like becoming a meaningful percent.

I think we're modeling beyond 2025 for that.

And that's okay. If you're if you think like fast forward a couple of more years than you know the end of this government contract is there and then devices are starting to be available to be designed into real systems. That's why I think we should all expect sort of a step function increase to take place.

The storefront revenue really kicking up because storefront revenue is going to far exceed any I P lie.

Life science or royalty that we would we would see for these types of designs right.

Okay Fair enough I'll ask one more question and jump out of line here. So obviously, where we've hit profitability, we're going to have a nice growth here here are with with seemingly better a better profitability at least gross profit contribution how do we think about your investments in Opex here should go through out there or are you going to keep it relatively.

Brian Faith: Obviously, we've hit profitability, and we're gonna have nice growth here here with seemingly better, better profitability, at least gross profit contribution. How do we think about your investments in OPEX here as we go throughout the year? Are you going to keep it relatively flat or kind of opening up some some job openings in any way? Or how do we think about this both kind of qualitatively as well as quantitatively?

Flat or kind of opening up some some job openings in any way or how do we think about this both kind of qualitatively or quantitatively.

Elias N. Nader: I'll let Elias do the quantitative and then I'll give some qualitative comments on that. Yeah, so I think we're going to be around three and a half million. So that's definitely an increase of about $200,000 Richard, a quarter. I think mainly because we have, we do have positions open. We've been very vocal about it with everyone.

I'll, let elias to the quantitative and then I'll give some qualitative comments on that.

So I think we're gonna be like around the three and a half opinions. So that's definitely an increase of about that.

$200000, Richard a quarter I think mainly because we have we do have positions open.

Been very vocal about it with everyone. If you'll talk careers website, you'll see the open web rollover engineering positions open.

Elias N. Nader: If you go to our careers websites, you'll see it open. We have a lot of engineering positions open. We have just hired a sales person in the U.S. that was very necessary. So we're available. We are going to hire and basically spend the money to invest in the business. But that's really a very small change compared to what we're expecting in growth.

Just hi, this is James a person in the U S and I was very necessary, so where applicable we are going to have higher and basically.

And the money to invest in the business, but that's that's really very small change compared to what were you expecting growth.

Brian Faith: All right, so the qualitative comments on top of that. So I was actually on a panel at the Chiplet Summit a couple weeks ago at the Santa Clara Convention Center. And the whole topic of that was around innovation and entrepreneurship in primarily, but it extends to semiconductors. And so one of the topics of discussion was, how do we run our companies? And my answer to that was that we run this company like a publicly traded startup. What does that mean? That means, obviously, we have to be mindful of all the financial metrics and targets that a public company has to do, and internally, we run it like a startup where we, you know, people are wearing multiple hats.

Okay.

Alright, so the qualitative comments on top of that so I was actually at a panel of a chip with summit a couple of weeks ago, and Santa Clara Convention Center and the whole topic of that was.

Around innovation and entrepreneurship in.

Sure chip, but it's primarily but it extends to semiconductors and so one of the topics of discussion was how do we run our companies and my answer to that was we run this company like a publicly traded startup.

What does that mean I mean, obviously, we have to be mindful of all the financial metrics and targets that are public company has to do.

And internally, we run it like a startup where we you know people are wearing multiple hats, we are really focused on customer and growth in revenue and doing it in a prudent.

Brian Faith: We are really focused on customer and growth and revenue and doing it in a prudent, Financially responsive way and why to make sure that we do that so that three and a half that increase From lists coming this past year is really about Looking at those opportunities that we do on a regular basis and these rifle shot hires that increase the capacity in our engineering team To execute on those revenue opportunities. And so that's why the growth in the headcount is primarily sales Which is top of funnel We clearly had sort of tapped out the capacity of our current sales team We want to add more because we saw so much of this opportunity, especially in the u.s That warranted having another person handling some of that and then on the engineering side The chalice is wonderful because it's automated But at the end of the day you still need engineering people to provide the intellect and porting these things to different process modes and making those Customizations that I mentioned earlier that drive value for customers and so more opportunities coming in We have to add more engineers and we love doing that because a that means there's demand and B I think we have a model a scalable model in place where we can add those and we can still remain profitable as we do it so profitable growth and customer diversification is really key for us this year and That that will come from these hires right driving more top-line opportunities and executing on those revenue contracts So yeah, you will see increase. I think most of the increase that Elias talked about is probably in headcount And I think that's for a very a very good reason, Appreciate the answer, guys.

Responsible way and why is to make sure that we do that so that three and a half that increase from this coming this past year is really about looking at those opportunities would be on a regular basis and these rifle shot hires that increase the capacity and our engineering team to execute on those revenue opportunities and so that's why the growth in the head count is primarily.

<unk> sales, which is top of funnel.

Barely had sort of capped out the capacity of our current sales team and we want to add more because we saw so much of this opportunity, especially in the U S that warrants that having another person handling some of that and then on the engineering side. This trial. This is wonderful because it's automated but at the end of the day you still need engineering people took Friday intellect, and putting these things in different parts.

<unk> notes and making those customization that I mentioned earlier that drive value for customers and so more opportunities coming in and we have to add more engineers and we love doing that because a that means theres demand and B I think we have a model a scalable model in places, where we can add those and we can still remain profitable as we do it so profitable growth and customer diversification is real.

Key for us this year and that that will come from these hires right driving more top line opportunities and executing on those revenue contracts. So yes, you will see increase I think most of the increase that I just talked about is probably in head count.

And I think that's for a very a very good reason.

Okay.

Operator: As always, I'll jump in line, and Scripter. Ladies and gentlemen, as a reminder, if you would like to, press star 1. There are no further questions at this time. I'd like to pass the call back to Brian Fahy. I'd like to, as always, thank everybody for joining the call today, and I look forward to seeing you at either a trade show or an investor conference or at our next earnings call, which will be approximately three months from now. Have a great day. Thank you. This concludes today's conference. You may now disconnect from www.quicklogic.com and www.quicklogic.com and QuickLogic. Thanks for watching. I'm Elias Nader. www.quicklogic.com

I appreciate the answer guys as always I'll jump online. Thanks.

Thanks Richard.

Yeah.

Ladies and gentlemen, as a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.

Sure.

No further questions at this time I'd like to pass the call back to Brian Faith for closing remarks.

Okay.

Well I like to as always thank everybody for joining the call today and I look forward to seeing you at either a trade show or at an Investor conference or at our next earnings call, which will be approximately three months from now.

Have a great day. Thank you.

This concludes today's conference you may now disconnect your lines and enjoy the rest of your day.

Yeah.

Yeah.

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