Q1 2024 QuickLogic Corp Earnings Call

Yeah.

Speaker Change: Ladies and gentlemen, good afternoon at this time I would like to welcome everyone to quick larger corporations first quarter fiscal 2024 earnings results Conference call.

Operator: Ladies and gentlemen, good afternoon. At this time, I would like to welcome everyone to QuickLogic Corporation's first-quarter Fiscal 2024 Earnings Results Conference Call. As a reminder, today's call is being recorded for replay purposes through May 20, 2024. Ms. Alison Ziegler, please go ahead.

Speaker Change: As a reminder, today's call is being recorded for replay purposes through May 22024, I would now like to turn the conference over to MS. Alison Ziegler.

Alison Ziegler: Dallas Associates, Michigan. Please go ahead.

Alison 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 quick logic makes today are forward looking statements that involve risks and uncertainties, including but not limited to stated XP.

Alison 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 customer 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.

Alison Ziegler: Actual results or trends may differ materially from those discussed today. For more detailed discussions of the risks, uncertainties, and assumptions that could result in those differences, please refer to the risk factors discussed in QuickLogic's most recently filed periodic reports with the SEC. QuickLogic assumes no obligation to update any forward-looking statements or information, which speak as of the respective dates of any new information or future events. In today's call, we will be reporting non-GAAP financial measures.

Alison Ziegler: 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 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. Such information may be deemed material information, and QuickLogic may use these channels to comply with its disclosure obligations under Regulation F-15.

Alison Ziegler: Dictations relating to revenue from new and mature products statements pertaining to quit largest future performance design activity and its ability to convert new design opportunities into production shipments timing and market acceptance of its customer products schedule changes in production start dates that could impact the timing of shipments the company's future.

Alison Ziegler: Valuation system 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.

Alison Ziegler: Those differences please refer to the risk factors discussed in quick <unk>. Most recently filed periodic reports with the SEC.

Alison Ziegler: 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.

Alison Ziegler: On 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 quick logic use.

Alison Ziegler: Its website the company blog corporate Twitter account, Facebook page and Linkedin page as channels of distribution of information about its business such.

Alison Ziegler: Formation may be deemed material information and quick logic may use these channels to comply with its disclosure obligations under regulation FD.

Alison Ziegler: A copy of the prepared remarks made on today's call will be posted on QuickLogic's IR page shortly after the conclusion of today's earnings call. I would now like to turn the call over to Brian.

Alison Ziegler: A copy of the prepared remarks made on today's call will be posted on quick logics I are paid shortly after the conclusion of today's earnings call I would now like to turn the call over to Brian go ahead, Brian.

Brian C. Faith: Thank you Alison and good afternoon, everyone and thank you all for joining our first quarter 2024 conference call.

Brian C. Faith: Thank you, Alison. Good afternoon, everyone, and thank you all for joining our first quarter 2024 conference call. Q1 revenue increased more than 45% year-over-year. This growth was driven by a nearly 60% increase in new product revenue, which was mostly from EFPGA IP contracts. With continued strong bookings, a record $179 million funnel, and some very significant EFPGA contract proposals pending, we remain confident that we'll deliver greater than 30% year-over-year revenue growth in 2024.

Brian C. Faith: Q1 revenue increased more than 45% year over year.

Brian C. Faith: This growth was driven by a nearly 60% increase in new product revenue, which was mostly from the FPGA IP contracts.

Speaker Change: With continued strong bookings a record $179 million funnel.

Speaker Change: And some very significant E. S. P G a contract proposals pending.

Speaker Change: We remain confident that we'll deliver greater than 30% year over year revenue growth in 2024.

Speaker Change: Let's take a few minutes now to I think the status for some of our major contracts and accomplishment.

Brian C. Faith: Let's take a few minutes now to update the status of some of our major contracts and accomplishments. First... Our strategic radiation-hardened FPGA government contract that has a total potential of $72 million. Last August, we announced the second tranche, which added Honeywell Aerospace as a foundry partner and increased the funding rate from tranche one levels to bring the Honeywell-based development up to speed quickly. Tranche II also funded our continued activity with SkyWater Technologies.

Speaker Change: First.

Speaker Change: Our strategic radiation hardened FPGA government contract that has a total potential of $72 million.

Speaker Change: Last August we announced the second tranche, which added Honeywell aerospace as the foundry partner and increase the funding rate from tranche one levels to bring the Honeywell based development up to speed quickly.

Speaker Change: <unk> also funded our continued activity with sky water technologies.

Brian C. Faith: We are anticipating Tronch 3 will be awarded later in Q2, and as we stated in our last conference call, we are modeling the funding rate for Tronch 3 will likely decrease from Tronch 2 and be more similar to Tronch 1. Due to this and the strategic shift in how we are now dividing revenue between engineering services and IP licenses, while we are projecting Q2 revenue will be up significantly year-over-year, we are currently forecasting a sequential decrease from Q1. We believe Q2 will mark the low point for the year.

Speaker Change: We are anticipating tranche three will be awarded later in Q2 and as we stated in our last conference call. We are modeling the funding rate for tranche three will likely decrease from tranche, two and be more similar to tranche one.

Speaker Change: Due to this and the strategic shift in how we are now designing revenue between engineering services and IP license. While we are projecting Q2 revenue will be up significantly year over year. We are currently forecasting a sequential decrease from Q1 we.

Speaker Change: We believe Q2 will mark the low point for the year.

Speaker Change: Since it is important I'll take a moment to review how the change in revenue split impacts when we recognized contract revenue on our income statement.

Brian C. Faith: Since it is important, I'll take a moment to review how the change in revenue split impacts when we recognize IP contract revenue on our income statement. At the start of the year, we shifted the majority of the IP contract dollar values from engineering services, which are recognized over the course of the contract, to IP licenses, which are recognized at the completion of our deliverable. This shift better aligns revenue with our deliverables and improves our ability to effectively negotiate and win future contracts.

Speaker Change: At the start of the year, we shifted the majority of the IP contract dollar values from engineering services, which are recognized over the course of the contract to IP license, which is recognized at the completion of our deliverables.

Speaker Change: Suggest better aligns revenue with our deliverables and improves our ability to effectively negotiate and win future contracts.

Brian C. Faith: While this change will push quite a bit of revenue recognition into the second half of 2024, it has absolutely no impact on our cash. We continue to believe we will be cash flow positive and solidly profitable for the full year 2024.

Speaker Change: While this change will push quite a bit of revenue recognition into the second half of 'twenty 'twenty four it has absolutely no impact on our cash flow.

Speaker Change: We continue to believe we will be cash flow positive and solidly profitable for a full year of 2024.

Speaker Change: Yeah.

Brian C. Faith: 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 nodes supported by our IP in 2024. On our last conference call, I announced that we had booked the first of two IP contracts that will be fabricated using the 12 nanometer process, and that the second contract was pending. We announced the finalization of the second contract in the March press, Both of these contracts will contribute to cash flow during the first half of 2024, but revenue will not be recognized on our income statements until completion of our deliverables in the second half of this year.

Speaker Change: 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 is supported by our IP in 2024.

Speaker Change: During our last conference call I announced that we bought the first of two IP contracts that will be fabricated using the 12 nanometer processes and not the second contract was pending.

Brian C. Faith: The first contract is with a defense industrial customer and will be fabricated on Global Foundry's 12 nanometer process known as 12LP. I cannot go into any detail beyond the fact that this contract is not related to the large ongoing radiation-hardened FPGA contract I just discussed. The second contract is with a large international company that I'm sure you would recognize.

Speaker Change: We announced finalizing the second contract and a March press release.

Speaker Change: Both of these contracts will contribute to cash flow during the first half of 2024, but revenue will not be recognized on our income statements until completion of our deliverables in the second half of this year.

Speaker Change: The first contract is with the defense industrial base customer and will be fabricated on Globalfoundries 12 nanometer process known as 12 all Pete.

Speaker Change: I cannot go into any detail beyond the fact this contract is not related to the large ongoing radiation hardened FPGA contract I just discussed.

Speaker Change: The second contract is with a large international company.

Speaker Change: I'm sure you would recognize.

Brian C. Faith: This design is for a new ultra-low power SoC that is targeting a variety of commercial and industrial IoT applications. This design will be fabricated by TSMC on its 12nm processor. Within the SoC, our eFPGA 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 EFPGA technology than a processor running the acceleration algorithms and software. In short, an EFPGA IP can be reprogrammed to adapt to changes in acceleration algorithms and perform acceleration more quickly and using much less power than a processor-based solution.

Speaker Change: This design is for a new ultra low power S. O C that is targeting a variety of commercial and industrial Iot applications.

Speaker Change: This design will be fabricated by TSMC on its 12 nanometer process.

Speaker Change: Within the S. N C. A R E. S. P. G. A technology is used for AI acceleration.

Speaker Change: Which is a necessary function and most AI applications.

Speaker Change: We believe this will prove to be a rapidly growing application that is often better served by E. S. P. G. A technology than a processor running the acceleration algorithms and software and.

Speaker Change: In short and E. S. P. G. A I P can be reprogrammed to adapt to changes in acceleration algorithms and perform acceleration more quickly and using much less power than a processor based solutions.

Speaker Change: In November 2022, I shared that we taped out a new device, where a customer that incorporates our E. S. P. G AIP.

Brian C. Faith: In November 2022, I shared that we took 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 specific design when beyond a brief update, in line with what I covered during our last conference call, customers are continuing to work through certain aspects of the design. This work is progressing, and we anticipate resuming our efforts during the second half of 2024.

Speaker Change: Do you just strict confidentiality requirements I can't share more details on the specific design win beyond it brief update.

Speaker Change: In line with what I covered during our last conference call the customers continuing to work through certain aspects of the design.

Speaker Change: This work is progressing and we anticipate resuming our efforts during the second half of 2024.

Brian C. Faith: This customer could represent tens of millions of dollars in potential device revenue starting in a couple of years. Last September, we announced that a leading technology company chose our EFPGA IP4 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.

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

Speaker Change: 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 ft X platform.

Speaker Change: Again, you just strict confidentiality requirements I cannot go into more detail on the design, but I can share that we have delivered our IP to the customer and expect to tape out to initiate this quarter.

Brian C. Faith: But I can share that we have delivered our IP to the customer and expect takeout to initiate this quarter. Last November, we announced that the Global Semiconductor Leader chose our EFPGA IP for a design that will be fabricated on UMC's 22nm platform. We have completed the delivery of our IP and expect KPAT to initiate this quarter. In total, we are on contract to deliver our IP on six different Foundry process technology combinations, including two that will be fabricated using 12 nanometer technology. This is up 3x from a year ago with minimal growth in the associated R&D costs.

Speaker Change: Last November we announced a global semiconductor leader chose our E F. PGA IP for a design that will be fabricated on Umc's 22 nanometer platform.

Speaker Change: We have completed the delivery of our IP and expect tape out to initiate this quarter.

Speaker Change: In total we are on contract to deliver our IP on six different foundry process technology combinations, including two that will be fabricated using 12 nanometer technology.

Speaker Change: This is up three X from a year ago with minimal growth in the associated R&D cost.

Brian C. Faith: This demonstrates the market demand for EFPGA IP is accelerating and that the automation from our proprietary Australis IP generator enables us to address this demand in a scalable way. We have several chiplet opportunities in our funnel, including deals with our partner Yorkship. As a matter of fact, we recently submitted two substantial proposals this year with a combined value of over $40 million, one in conjunction with Yorkshire.

Speaker Change: This demonstrates the market demand for E. FPGA IP is accelerating and that's the automation from our proprietary australis IP generator enables us to address this demand in a scalable way.

Speaker Change: We have several chipset opportunities in our funnel, including deals with our partner York yet.

Speaker Change: As a matter of fact, we recently submitted two substantial proposals this year with a combined value of over $40 million one in conjunction with your chip.

Speaker Change: As I mentioned in our last conference call, our elite smartphone customer works through its excess inventory of E. S. S. Three that limited our shipments during 2023.

Brian C. Faith: As I mentioned in our last conference call, our lead smartphone customer worked through its excess inventory of ESS3 that limited our shipments during 2023, and we have resumed shipping to support production. We hosted a meeting with this customer at our San Jose headquarters earlier in Q2. Based on the customer's outlook, we expect volume will increase in 2024 as our EOS S3 solution is selected for new designs that will ship well into 2025.

Speaker Change: And we have resumed shipping to support production.

We hosted a meeting with this customer at our San Jose headquarters earlier in Q2.

Speaker Change: Based on the customers' outlook, we expect volume will increase in 2024 as Eric E. S. S. III solution was selected for a new designs that will ship well into 2025.

Speaker Change: Consistent with the outlook, we shared last quarter, we are forecasting a modest increase in display bridge shipments this year and expect the mature product revenue will be similar to what it was in 2023.

Brian C. Faith: Consistent with the outlook we shared last quarter, we are forecasting a modest increase in display-bridge shipments this year and expect mature product revenue will be similar to what it was in 2023. A couple weeks ago, we announced the release of Aurora 2.6, our comprehensive EFPGA development tool. This release of Aurora includes a number of significant improvements that will expand our market opportunities and help us win new designs. In Aurora 2.6, we expanded operating system support to include multiple versions of Linux, including CentOS, Red Hat, and Ubuntu, and included support for Windows 10 and 11.

Speaker Change: A couple of weeks ago, we announced the release of Aurora chewed up six hour comprehensive E FPGA development tool suite.

Brian C. Faith: Furthermore, through the incorporation of new architectural improvements, Aurora 2.6 can also deliver up to a 15% improvement in speed. In some EFPGA designs, critical path timing can be even more important than raw speed. To address this need, Aurora 2.6 incorporates interactive path analysis and a new graphical user interface. For our customers, this means easier-to-use, better performance, shorter development cycles, and lower development costs. With our planned investments in R&D, we have a cadence of Astralis and Aurora releases scheduled throughout this year that will provide further improvements in flow automation, increased IP core speed by up to 50%, and reduced die size for our EFPGA hard IP implementation. Turning to Sentinel.

Speaker Change: Release of Aurora includes a number of significant improvements that will expand our market opportunities and help us win new designs.

Speaker Change: In a world once you got six we expanded operating system supports multiple versions of Linux, including Cento S Red hat and a bunch of you.

Speaker Change: And included support for Windows, 10, and 11.

Speaker Change: Furthermore, through the incorporation of new architectural improvements abroad. You got six can also deliver up to a 15% improvement in speed.

Speaker Change: And so E FPGA designs critical path timing can be even more important that raw speed.

Speaker Change: To address this need Aurora two about six incorporates interactive path analysis, and our new graphical user interface.

Speaker Change: For our customers this means easier to use better performance shorter development cycles and lower development costs.

Speaker Change: With our planned investments in R&D, we have a cadence of australis and Aurora releases scheduled throughout this year that will provide further improvements to flow automation increased IP core speed by up to 50% and reduced die size for our FPGA hard IP implementations.

Brian C. Faith: I'm very excited about the progress made during the last three months. In short, there has been a notable shift in strategy that has accelerated near-term revenue and, we believe, will substantially accelerate end-user adoption. The first step was to sign a six-figure contract with a major MCU company, which put Sensimo on track to deliver the material 2024 revenue growth I forecasted last quarter. Subsimil is discussing a similar agreement with other MCU companies.

Speaker Change: Turning to the sensor mall I'm very excited about the progress made during the last three months in short there has been a notable notable shifts in strategy that has accelerated near term revenue and we believe will substantially accelerate end user adoption there.

Speaker Change: The first step was to sign a six figure contract with a major MCU company, which quite sensible on track to deliver the material 2020 for revenue growth I forecasted last quarter.

Speaker Change: <unk> always discussing a similar agreement with other MCU companies.

Brian C. Faith: The second step will be revealed in more detail tomorrow morning. Leveraging the four years of experience and success monetizing an open-source business model at QuickLogic, SensorMobile announced its own open-source strategy in a press release issued before the market opened. The short story here is that open source provides customers with the transparency and security they need to incorporate high-value IP in their designs and, in many cases, also adopt proprietary processes and professional services. You have seen how this strategy has enabled QuickLogic to more fully leverage and monetize its proprietary IP and expand its reach into a variety of end markets.

Speaker Change: The second stack will be revealed in more detail tomorrow morning.

Speaker Change: Leveraging the four years of experience and success monetizing and open source business model at quick logic, Samsung mobile announced its own open source strategy in a press release issued before the market opens.

Speaker Change: The short story here is open source provides customers the transparency and security they need to incorporate high value IP and their designs and in many cases also adopt proprietary processes and professional services.

Speaker Change: You have seen how this strategy has enabled quick logic to more fully leverage and monetize its proprietary IP and expand its reach into a variety of end markets. I believe we will see the same from sensible and what's the market's ravenous appetite to adopt AI and ml, we anticipate a much faster ramp and that much broad.

Brian C. Faith: I believe we will see the same from Sensimal, and with the market's ravenous appetite to adopt AI and ML, we anticipate a much faster ramp and a much broader market reach for Sensimal. 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.

Speaker Change: Their market reach for sensible.

Speaker Change: With that let me now I'll turn the call over to Elias for a review of our financial results and I will rejoin for closing remarks, Alaska. Please go ahead.

Elias N. Nader: Thank you, Brian, and good afternoon, everyone. I am happy to report that our first quarter revenue aligned with our forecast and drove our third consecutive quarter of profitability. And Anand Gabbis. Revenue for the first quarter was $6 million, a solid 45% increase from the first quarter of 2023. Compared to the fourth quarter of 2023, Q1 revenue was off approximately 20%, reflecting the previously communicated strategic shifts, in the spirit of FPGA IP contracts revenue between professional services and IP licenses that will push most of the revenue acquisition to the second half of the year.

Elias N. Nader: Thank you, Brian and good afternoon, everyone.

Elias N. Nader: I am happy to report that our first quarter revenue.

Aligned with our forecast until the third consecutive quarter of profitability.

Elias N. Nader: On a non-GAAP basis.

Elias N. Nader: Revenue for the fourth quarter was $6 million, a solid 45% increase from the first quarter of 2023.

Compared to the fourth quarter of 2020.

Elias N. Nader: Q1 revenue was off by approximately 20%.

Elias N. Nader: Flip to the previously communicated strategic shift.

In the script FPGA IP contracts revenue.

Elias N. Nader: Professional services and IP license that would push most of the revenue recognition into the second half of the year.

Please note this shift does not affect cash flow.

Elias N. Nader: Please note, this shift does not affect cash flow. Within our Q1 revenue, sales of new products were approximately $4.9 million. This compares to $3.1 million in the first quarter of last year, up nearly 60%, and $6.8 million in the fourth quarter of 2023, down 29%. Pure product revenue was approximately $1.1 million.

Elias N. Nader: Q1 revenue sales of new products and approximately $4 million.

Elias N. Nader: This compares to 1.1 million in the first quarter of last year and 0.7 million in the fourth quarter. Our results continue to reflect higher EFPG IP license and professional services revenue. Non-GAAP gross margin in Q1 was 17.3% compared with 59.7% in the first quarter of 2023 and 78.3% in the fourth quarter. The strongest margins in the last few quarters resulted from the higher revenue level and a higher concentration of revenue related to IP contracts. Our non-GAAP operating expenses in Q1-24. We're for approximately $2.5 million.

Elias N. Nader: This compares to $3 $1 million in the first quarter last year.

Elias N. Nader: 60%.

Elias N. Nader: $6 $6 million in the fourth quarter of 2023 down 29%.

Elias N. Nader: Mature product revenue was approximately $1 1 million.

Elias N. Nader: This compares to $1 1 million in the first quarter of last year.

Elias N. Nader: 0.7 million in the fourth quarter.

Elias N. Nader: Our results continue to reflect higher E. S. P P license and professional services revenue.

Elias N. Nader: non-GAAP gross margin in Q1.

Was 17, 3% compared with 59, 7% for the first quarter of 2023.

Elias N. Nader: And 78, 3% in the fourth quarter.

Elias N. Nader: The strong gross margin in the last few quarters.

Elias N. Nader: Resulted from the higher revenue level.

Elias N. Nader: The higher concentration of revenue related to IP contracts.

Elias N. Nader: Our non-GAAP operating expenses in Q1 24.

Elias N. Nader: Approximately $2 5 million Boes.

Elias N. Nader: This compares with non-GAAP operating expenses of $2.9 million in the first quarter of last year and $3.1 million in the fourth quarter. Lower down-gap operating expenses in Q1-24, while below outlook, primarily due to allocations from R&D to COGS due to the professional services contracts and reductions in outside services in SG&E. Please note the larger difference between GAAP and non-GAAP operating expenses is attributable to the timing of stock-based compensation for deferred incentives for executives and managers from prior years. This deferred incentive compensation accounts for approximately half of the stock-based compensation recorded for Q1.

Elias N. Nader: This compares with non-GAAP operating expenses.

Elias N. Nader: $2 $9 million in it.

Elias N. Nader: First quarter last year.

Elias N. Nader: Three one and $3 $1 million in the fourth quarter.

Elias N. Nader: We reduced non-GAAP operating expenses in Q1 24.

Elias N. Nader: While below our outlook.

Elias N. Nader: Really due to allocation from R&D to Cogs.

Elias N. Nader: Each of the professional services contracts and reductions in outside services and SG&A.

Elias N. Nader: Okay.

Elias N. Nader: Please note the larger difference between GAAP and non-GAAP operating expenses.

Elias N. Nader: Is that could be attributed to the timing of stock based compensation for Detroit incentives.

Elias N. Nader: For executives and managers from prior years.

Elias N. Nader: Is this the first incentive compensation accounted for approximately half of the stock based compensation recorded for Q1.

Elias N. Nader: Yeah.

Elias N. Nader: non-GAAP net income was $1 $7 million or 11 cents per diluted share.

Elias N. Nader: Non-GAAP net income was $1.7 million, or $0.11 per deleted share. This compares to a non-GAAP net loss of $0.5 million, or $0.04 per share, in last year's first quarter, and a non-GAAP net income of $2.6 million, or $0.18 per deleted share, in the fourth quarter of fiscal 2023. In the fourth quarter, one customer accounted for 10% of monthly revenue at the close of Q1.

Elias N. Nader: This compares to a non-GAAP net loss of $5 million.

Elias N. Nader: Four cents per share in last year's first quarter, non-GAAP net income of $2 $6 million or <unk> <unk> per diluted share in the fourth quarter of fiscal 2023.

Elias N. Nader: For the first quarter or one customer comments, what type of Central mall type revenue.

Elias N. Nader: At the close of Q1.

Elias N. Nader: Total cash was $27.4 million compared to $24.6 million at year-end 2023. This is a piece of the $3.5 million net proceeds raised through a registered direct offering with such institutional investors in March of this year. It is also inclusive of our $20 million credit facility.

Elias N. Nader: Total cash was 27 4 million compared with $24 6 billion to.

Elias N. Nader: 23.

Elias N. Nader: This is inclusive of $3.5 million net proceeds.

Elias N. Nader: Please go to the registered direct offering with such an institutional investors in March of this year.

Elias N. Nader: It is also inclusive of a $20 million credit facility.

Elias N. Nader: Now moving to our guidance for the second quarter of fiscal 'twenty, 'twenty four which.

Elias N. Nader: Now moving to our guidance for the second quarter of fiscal 2024, which will end on June 30, 2024. Revenue guidance for Q2 2024 is approximately $4.5 million, plus or minus 10 percent, which represents an increase of 55% over Q2 2023. Second quarter revenue is expected to be comprised of approximately $3.6 million in new products, which is a year-over-year increase of 64%, and 0.9 million mature products, which is a year-over-year increase of 29%.

Elias N. Nader: It will end on June 32024.

Elias N. Nader: Revenue guidance for Q2, 'twenty 'twenty four is that approximately $4 $5 million.

Elias N. Nader: Plus or minus 10%.

Elias N. Nader: This represents an increase of 55% over Q2 2023.

Second quarter revenue is expected to be comprised of approximately $3 $6 billion of new products.

Elias N. Nader: As of year over year increase of 64%.

Elias N. Nader: Zero, plus 9 million much of.

Elias N. Nader: Mature products switches.

Elias N. Nader: The increase of 29%.

Elias N. Nader: The projected total revenue declined from Q1, 'twenty 'twenty four is primarily due to the timing and cadence.

Elias N. Nader: The projected total revenue decline from Q1 2024 is primarily due to the timing and cadence of large IP contracts and a strategic shift that splits a higher percentage of contract revenue to IP, just as engineering services, to better align with deliverables. This will continue to result in shifting certain revenue recognition to the second half of the year that is not expected to impact the timing of cash flow from this country. For the full year 2024, we're still anticipating more than 30% growth in revenue and positive cash flow generation.

Elias N. Nader: A large IP contracts and our strategic shifts.

Elias N. Nader: That's a higher percentage of contract revenue to IP.

Elias N. Nader: Engineering services, so better aligned with our deliverables.

Elias N. Nader: It will continue to result in shifting certain revenue recognition. So the second half of the year, but it is not expected to impact the timing of cash flows from these contracts.

Elias N. Nader: For the full year 'twenty 'twenty, four we're still anticipating more than 30% growth in revenue and a positive cash flow generation.

Elias N. Nader: Based on the anticipated Q2 revenue mix non-GAAP gross margin for the quarter is expected to be approximately 70% plus or minus five percentage points.

Elias N. Nader: Based on the anticipated Q3 revenue mix, our non-GAAP gross margin for the quarter is expected to be approximately 70%, plus or minus 5 percentage points. Additionally, our non-GAAP operating expenses will be approximately $3.2 million, plus or minus 10%. We believe quarterly non-GAAP OPEX will remain in the $3.2 million range for the balance of 2024, with occasional increases to support new programs. Please note that given the nature of our industry, we may occasionally need to reclassify certain expenses to call or capitalize certain costs.

Elias N. Nader: Our non-GAAP operating expenses.

Elias N. Nader: It would be approximately $3 $2 million plus or minus 10%.

Elias N. Nader: We believe quarterly non-GAAP Opex will remain in the $3 $2 million range.

Elias N. Nader: For the balance of 'twenty 'twenty, four with the occasional increases to support new programs.

Elias N. Nader: Please note that given the nature of our industry, we may occasionally used to reclassify.

Elias N. Nader: So it's an expense system Cogs.

Elias N. Nader: Capitalize certain costs.

Elias N. Nader: The reclassifications are primarily related to labor and tooling for our revenue contracts with customers. Such capitalization may reduce OPEX and alter the timing for recognizing the corresponding expenses and costs. This may cause variability in our gross margins on our polluting results.

Does that cause the reclassification is primarily related to labor and tooling.

Elias N. Nader: Revenue contracts with customers.

Elias N. Nader: Such capitalization or reduce opex and also the timing for recognizing the corresponding expenses in Cogs.

Elias N. Nader: This may cause variability in our gross margins on operating results.

Elias N. Nader: Bearing these factors in mind, we believe a full year 2024 non-GAAP gross profit margin will be in the upper 60% range. We believe we are well-positioned to deliver robust profitability for the full year 2024. After interest, other income, and taxes, we currently forecast that our Q2 non-GAAP net income will be approximately $0 to $0.4 million, or zero to three cents per share based on roughly 14.7 million fully diluted shares. The difference between GAAP and non-GAAP results is related to non-cash, stock-based compensation expense.

Elias N. Nader: During these factors in mind.

Elias N. Nader: We believe our full year 2024, non-GAAP gross profit margin.

Elias N. Nader: We'll be in the upper 60% range.

Elias N. Nader: We believe we are well positioned to deliver.

Elias N. Nader: Bus profitability for the full year 'twenty 'twenty four.

Elias N. Nader: After interest, although you've come on Texas.

Elias N. Nader: Currently forecast about Q2, non-GAAP net income would be approximately zero.

Elias N. Nader: So zero point $4 million or zero to three cents per share based on roughly $14 7 million fully diluted shares.

Elias N. Nader: The difference between our GAAP and non-GAAP results is related to noncash.

Elias N. Nader: <unk> based compensation expenses.

Elias N. Nader: In Q2, we expect this compensation will be approximately 0.8 million.

Elias N. Nader: In Q2, we expect this composition will be approximately 0.8 million. As a reminder, there will be movements in our stock-based compensation during the year and in each quarter based on the timing of grants to employees. The investments this quarter to support the new design means that we have discussed, including hiring critical engineering and sales roles and the timing of certain payments. On a bigger point, we expect cash reserves to be less than $1 million again in Q2.

Elias N. Nader: As a reminder, there will be movements in our stock based compensation during the year.

Elias N. Nader: They're very each quarter based on the timing of grants to employees.

Elias N. Nader: It's investments this quarter to support the new design wins that we have discussed.

Elias N. Nader: Hi, Reed critical engineering and sales roles on the timing of certain payments.

Elias N. Nader: That's the big points, we expect cash usage to be less than $1 million again in Q2.

Elias N. Nader: These investments.

Elias N. Nader: These investments are in anticipation of continued strong growth in 2024 and timed with the signing of new contracts for design-ready. As previously mentioned, we are on track to achieve cash flow positivity in the third quarter of the full year 2024. Thank you for your time. With that, let me now turn the call back over to Brian for his closing remarks.

Elias N. Nader: They shouldn't have continued strong growth in <unk>.

Elias N. Nader: 'twenty 'twenty four times with the signing of new contracts won design wins.

Elias N. Nader: As previously mentioned, we are on track to achieve cash flow positivity in the third quarter and for the full year 'twenty pretty full.

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

Brian C. Faith: Thank you Elias.

Brian C. Faith: It has become increasingly evident that our unique position and more than three decades of experience as a manufacturer of FPGA-centric devices sets us apart from other eFPGA IP companies. With this, we have the experience, operational structure, and established relationships that are required to manage final design, device fabrication, package, test, and Finish Device Delivery for the many customers that don't have these resources in-house. These capabilities expand our served available market for IT to include customers that do not have these capabilities in-house and want us to storefront their design.

Brian C. Faith: It is becoming increasingly evident that our unique position and more than three decades of experience as a manufacturer of FPGA centric devices sets us apart from other E FPGA IP companies.

Brian C. Faith: With this we have the experience operational structure and establish relationships that are required to manage final design device fabrication package test and finished device delivery for the many customers that don't have these resources in house.

Brian C. Faith: These capabilities expand our served available market for IP.

Brian C. Faith: To include customers that do not have these capabilities in house and want us to storefront their designs.

Brian C. Faith: This opens markets for us that could be orders of magnitude larger than our core IP license business. Some of these opportunities are well-defined and near enough that they are included in our rolling two-year funnel, which is currently at an all-time record of $179 million.

Brian C. Faith: This opens markets for us that could be orders of magnitude larger than our core IP license business.

Brian C. Faith: Some of these opportunities are well defined and near enough that they are included in our rolling to your funnel, which is currently at the all time record of $179 million.

Operator: The experiences we gained through more than 30 years of designing and delivering semiconductor devices are also at the foundation of the proprietary tools we've developed. These tools help our IP customers that prefer to manage the manufacturing flow, shorten design cycles, and lower development costs. This provides them with a much more efficient path to target the foundry and fabrication process of their choosing. As I noted in our last call, I think three years of greater than 30% top-line growth proves our IP business model built upon open source components has traction in the market, and with that traction established, we are building momentum.

Brian C. Faith: The experiences we gained through more than 30 years of designing and delivering semiconductor devices is also at the foundation of the proprietary schools to be developed.

Brian C. Faith: These tools help our IP customers that prefer to manage the manufacturing flow shorten design cycles and lower development costs.

Brian C. Faith: This provides them with a much more efficient path to target the foundry and fabrication process of their choosing.

Brian C. Faith: As I noted in our last call I think three years of greater than 30% top line growth proves our IP business model built upon open source components.

Brian C. Faith: As traction in the market and with that traction established we are building momentum.

Operator: That momentum is supported by the fact we are seeing more opportunities in a wide variety of end markets, including the defense market, where some of the most noteworthy prime contractors have recently approached us to discuss strategic partnerships to pursue major contracts. 2024 will be another year of building our IP foundation and we believe it will drive another year of 30% plus growth. We also think there is a very good chance that our growth will accelerate in the near future as storefront, royalty, and other finished device strategies begin to kick in. With that, I would like to open the call to questions.

Brian C. Faith: Momentum is supported by the fact, we are seeing more opportunities in a wide variety of end markets, including the defense market, where some of the most noteworthy prime contractors have recently approached us to discuss strategic partnerships to pursue a major contracts.

Brian C. Faith: Well 'twenty 'twenty four will be another year of building, our IP Foundation, and we believe will drive another year of 30% plus growth.

Brian C. Faith: We also think there is a very good chance that our growth will accelerate in the near future.

Brian C. Faith: Storefront royalty and other finished device strategy began to kick in.

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

Speaker Change: Ladies and gentlemen, if you would like to ask a question. Please press Star then one on your telephone keypad and a confirmation tone will indicate your line is in the question queue.

Operator: Ladies and gentlemen, if you would like to ask a question, please press star, then one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the chat. For participants using speaker equipment, it may be necessary to pick up your handset before pressing start. And the first question comes from the line of Richard Shannon with Craig Hallam. Please proceed.

Speaker Change: You May press star two if you'd really like to remove your question from the queue.

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

Speaker Change: And the first question comes from the line of Richard Shannon with Craig Hallum. Please proceed.

Well Hi, Brian Alliance, how are you guys doing.

Richard Cutts Shannon: Hi Brian and Elias,

Brian C. Faith: Richard, how are you?

Speaker Change: Yeah.

Speaker Change: Yeah.

Richard Cutts Shannon: Doing fine, thank you. Well, let's hear a couple of questions.

Richard Cutts Shannon: Doing fine thank you.

Richard Cutts Shannon: <unk>.

Brian C. Faith: I guess I just wanted to make sure I understood the guidance for the quarter and for the year here. You're talking about the specific large project with Rad Hard being the third tranche being awarded here sometime during the quarter. Is the guidance for the second quarter, is that, are you including anything from that expectation in there, or is it all in the back half of the year?

Brian C. Faith: He was here a couple of questions I guess I just wanted to make sure I understand the guidance for the quarter going through the year here, you're talking about the specific a large project with Rad hard.

Brian C. Faith: Being a the third tranche being awarded here.

Brian C. Faith: Sometime during the quarter is the guidance for the second quarter does that is there are you, including anything from that expectation in there or was it all in the back half of the year.

Speaker Change: We are factoring in our estimate for that in Q2 and the guidance that we provided.

Brian C. Faith: We are factoring in our estimate for that in Q2 in the guidance that we provided.

Speaker Change: Okay. That's fair enough and then did I hear correctly related to the Rad hard deal that youre expecting a cadence of revenues in the third tranche, it's closer to the that that of the first tranche of it and if so can you maybe elaborate on that.

Brian C. Faith: Okay, that's fair enough. And then, related to the Rad-Hard deal, are you expecting a cadence of revenues in the third tranche that's closer to that of the first tranche of it? And if so, can you maybe elaborate on that?

Brian C. Faith: If you remember, the first tranche was awarded in August of 2022, and the total value of that contract was effectively spread across for approximately 10 months. And so we're expecting a similar monthly rate for this third tranche. And when I say yes, expecting, I should say we're estimating because we're still going through this process with our sponsor. But that's the modeling that we're using as we're providing our Q2 guidance and her full year revenue outlook for 2024.

Speaker Change: Yes.

Speaker Change: If you remember the first tranche was in awarded in August since 2022.

Speaker Change: And the total value of that contract.

Speaker Change: It was effectively spread across approximately 10 months.

So we're expecting a similar monthly rate for.

Speaker Change: The third charge.

Speaker Change: And when I say us except for instance, we're estimating because we're still going through this process with our sponsor.

Speaker Change: Uh huh.

Speaker Change: But that's the modeling that we're using is we're providing our Q2 guidance and our full year revenue outlook for 2024.

Speaker Change: Okay Fair enough. That's a that's good to know that there.

Richard Cutts Shannon: Okay, fair enough. That's good to know. Let's do a couple more questions.

Speaker Change: There are a couple more questions.

Speaker Change: Intriguing here about sensible you got a $100000 plus contract here with the with the major MCU company here, maybe if you can I don't know if you want to front run what when we may hear about tomorrow morning, or or not but just kind of wanted to get a sense of of what this is all about just the company that has no capability in kind of edge AI or.

Richard Cutts Shannon: Very intriguing here about Sensible. You got a $100,000 plus contract here with a major MCU company here. Maybe if you can, I don't know if you want to front run what we may hear about tomorrow morning or not, but I just kind of want to get a sense of what this is all about. This is a company that has, you know, no capability and kind of edge AI or kind of a complement to what they already have. And maybe you can kind of characterize what you mean by a major.

Speaker Change: A kind of a complement to what they already have and maybe you can kind of characterize what you mean by major.

Speaker Change: Yes.

Speaker Change: Yeah, I'd say major for us in the microcontroller space would be.

Brian C. Faith: Yeah, I'd say major for us in the microcontroller space would be, let's say, the top 10 microcontroller vendors. We're not going to go into details on the nature of the contract itself on this call, but maybe what I'll do is tease out a little bit more of the detail that's going to go out in the press release tomorrow from Sensible, because I think it's related to this. So the open sourcing of Sensible, if you think about, firstly, what QuickLogic has done, we're leveraging a lot of open source components because you get a lot of industry collaboration and contributing to features and enhancements that smaller companies can't do in time or money by themselves.

Speaker Change: Let's say top 10 microcontroller vendors.

Speaker Change: We're not going to go into details on the nature of the contract itself.

Speaker Change: On this call.

Speaker Change: What I'll do is tease out a little bit more of the detail. That's gonna go out in the press release tomorrow from sensible.

Speaker Change: Because I think.

Speaker Change: It's related to this so the the open sourcing a sensible if you think about firstly what the project is done you know, we're leveraging a lot of open source components.

Speaker Change: Because you get a lot of sort of industry collaborating and contributing to features and enhancements that smaller companies can't do any time or money by themself and so the acceleration in bringing in a new capabilities to an already I would say very well.

Brian C. Faith: And so it's the acceleration and bringing in new capabilities to an already, I would say, very well-established toolkit that Sensible has. And then, by virtue of that, you know, people that are looking at Machine Learning, AI, software workflows like SenseML, I think they can take some confidence in the fact that what they see today is probably only a fraction of what the capability is in the future. And there'll be an open source path for some of the core elements of that, provided that those companies want to abide by what's called a copyleft open source licensing scheme, as opposed to the more permissive Apache or MIT open source licensing.

Speaker Change: Established tool kit that something will happen.

Speaker Change: And then by virtue of that you know people that are looking at.

Speaker Change: Machine learning AI software workflows lifestyle small I think they can take some confidence in the fact that what they see today, there's probably only a fraction of what the capability is in the future.

Speaker Change: And there will be an open source path for some of the core elements of that provided that those companies want to.

Speaker Change: Bye Bye bye, what's called a coffee left open source licensing scheme.

Speaker Change: As opposed to the more permissive.

Speaker Change: Patchy or M. I T open source licenses.

Brian C. Faith: So I think the combination of having these options out there for people to license will give them that comfort and expectability and security and future growth in features and functions and make it even more interesting for them to actually do further licensing deals with Senseable in the future, especially when you think that Senseable has established how you set up the customer derivatives, the private labels, the identification aspects, all the things you would expect from doing business with an actual company on software. So I think it's exciting.

Speaker Change: I think the combination of having these options out there for people to license will give them the comfort that's ability and security and future growth and the features and functions and make it even more interesting for them to actually do.

Speaker Change: Do you further licensing deals with sensible in the future, especially when you think that that's why having established this for so long and understanding how you manage cloud service components and how you.

Speaker Change: How are you set up the.

Customer derivatives, the private labels the indemnification aspects all the things you would expect from doing business with a national company on software so.

Brian C. Faith: They're going to have learned a lot from what QuickLogic has learned in terms of how to effectively monetize and leverage collaborations with the open source community. And I think we'll see that happening here with Senseable. And, of course, there'll be a lot more details in the press release tomorrow.

Speaker Change: I think it's exciting they're gonna have learned a lot from our la Quinta Classic has learned in terms of how to look at it.

Speaker Change: Effectively monetize and leverage collaborations with the open source community.

And I think we'll see that happening here, a sensible and of course they'll be a lot more details in the press release Tomorrow.

Speaker Change: Okay.

Richard Cutts Shannon: Okay. Fair enough. Great detail there. I'll probably follow up on that topic. Sounds very interesting. My last question here, and I'll jump out of line, is, hopefully, I caught the right language that you provided here, but you talked about a couple of different contracts for chiplets where you submitted proposals for over $40 million, one with your announced partner for your chip. $40 million is pretty sizable for you. I'm assuming that these include some elements of storefront in there, but maybe you could kind of give any more clarity on when you expect those to be awarded and maybe other details you can offer. Thanks, Brian.

Speaker Change: Fair enough great detail, there I'll, probably follow up on that topic sounds very interesting my last question here and I'll jump out of line.

Speaker Change: Hopefully I caught the right language that you provided here, but you talked about a couple of different contracts and chip, let's we submitted proposals for over $40 million wondering with your announced partner of your chip.

Speaker Change: $40 million, it's a pretty sizeable free I'm assuming that these include some element of storefront in there, but maybe you could kind of give any more clarity on when do you. When do you expect those to be awarded.

Speaker Change: And maybe on the details you can offer thanks, Brian.

Brian C. Faith: Yeah, I can elaborate a little bit more on that, Richard. So firstly, remember anything that, outside of roughly two years' horizon, does not fall into our sales funnel. It only falls into that funnel in terms of the dollar values, like the $179 million that we just talked about today, once it's within an approximately two-year horizon. So these... chiplet-specific ones that we are talking about and the $40 million do have the potential to become chiplets, and we would like that.

Brian C. Faith: Yeah, I can elaborate a little bit more on that Richard.

Brian C. Faith: So firstly remember anything that's outside of roughly two years horizon does not fall into our sales funnel. It definitely falls into that funnel in terms of the dollar values like the 179 million that we just talked about today one sits within approximately two year horizon. So.

Brian C. Faith: These shipments specific ones that we are talking about in the $40 million do you have the potential to become ship listen we would like that but.

Brian C. Faith: But I think there are two factors to remember here, one is that chiplet revenue is not part of that $40 million, and two, any chiplet revenue that would be part of that would be outside of the sales funnel at this point in time, right? But I think you bring up an interesting question there, and I think part of that relates to our optimism and confidence in hitting this 30% revenue growth number for 2024 because, obviously, that would require a fairly significant increase in second half revenue over the first half.

Brian C. Faith: But I think two factors to remember here one is the chip revenue is not part of that $40 million and two.

Brian C. Faith: Each of our revenue that would be part of that would be outside of the sales funnel at this point in time, just because of the window right, but I think.

Speaker Change: That you bring up an interesting question, there and I think part of that relates to.

Our optimism and confidence in hitting that 30% revenue growth number for 2024.

Speaker Change: Because obviously that would require a fairly significant increase in seven second half revenue over the first half.

Speaker Change: So you know I'll be specific because I can't without getting into details down. The NDA is in bound by the specifics of these proposals I'm talking about.

Brian C. Faith: So I'll be as specific as I can without getting into details bound by NDAs and bound by the specifics of these proposals I'm talking about. So we definitely, you know, we view the continuation of the strategic red heart contract, which you covered already, and then some of these other larger contracts, like the $49 million total dollar one, those could be hitting and contributing to revenue later this year. And there's even another one that I didn't name specifically, but a mid-seven digit proposal that we've been working on since last year, in fact, not part of that $49 million dollar chiplet proposal number that I gave earlier.

Speaker Change: But we definitely you know we view the continuation of the strategic bet her contract, which you've covered already.

Speaker Change: And then some of these other larger contracts like this $48 million total dollar one.

Speaker Change: Those can be hitting and contributing to revenue later this year and then you have another one that I didn't name specifically, but a mid seven digit proposal that we've been working on since last year in fact, not part of that $49 ship with proposals.

Brian C. Faith: And we recently crossed a pretty important threshold in that whole process, the proposal process with that customer. So when you start to see things clicking across multiple segments, multiple proposals, and hitting these, what I'll call important internal milestones, those are the things that give us the confidence that we are, in fact, going to recognize enough revenue this year from these contracts within 2024 to achieve a greater than 30% revenue growth. I think more than you directly asked for, Richard, but I think it was good timing to add that little color to it.

Speaker Change: Number that I gave earlier and we recently across the pretty important.

Speaker Change: Important thresholds in that whole process proposal process, where that customer. So when you start to see the things clicking you know across multiple segments multiple proposals and hitting is that what I'll call the important internal milestones.

Speaker Change: Those are the things that give us the confidence that we are in fact going to recognize enough revenue. This year from these contracts within 2024 to achieve the greater than 30% revenue growth.

Speaker Change: I think more than you directly ask for Richard but I think most of you telling me to to have that little color to it.

Richard Cutts Shannon: I appreciate all that detail. Thanks for that, Brian. I will jump out of line for now.

Speaker Change: I appreciate all that detail thanks for that Brian and I will jump out of line for now thank you.

Speaker Change: Thanks Rod.

Operator: And the next question comes from Rick Neaton with Rivershore Investment Research. Please proceed.

Speaker Change: And the next question comes from the line of Rick Newton with River Shore investment Research. Please proceed.

Richard Anthony Neaton: Thank you. Good afternoon, Brian and Elias. I was, I was interested in some of your comments about Sensible. The six-figure contract mentioned in the press release, and then you mentioned it again in your prepared remarks, is that with a different MCU company than the white label agreement that Sensible has right now?

Richard Anthony Neaton: Thank you good afternoon, Brian and Elias.

Richard Anthony Neaton: Good afternoon.

Richard Anthony Neaton: I was interested in some of your comments about central mall.

Richard Anthony Neaton: The six figure contract mentioned in the press release, and then you mentioned it again in the.

Richard Anthony Neaton: Paired remarks is that with a different MCU company and the white label agreement.

Richard Anthony Neaton: Sensible has right now.

Speaker Change: We've not said that need so they can really do the NDA is we're not going to be able to directly answer because I think when we start talking about the number of companies we're targeting anyway.

Brian C. Faith: We've not shared that detail, Rick, and really, due to NDAs, we're not going to be able to directly answer it, because I think when we start talking about, you know, the number of companies we're targeting anyway, sets with one or two or more of those, I think, starts to paint, clear picture about which entities we are talking about in these contracts, and they don't want that detail shared by me, and so we really just have to sort of keep it at a high level when we talk about these. That's all right.

Speaker Change: Success, with one or two or more so I think that's clear.

Speaker Change: Clearer picture about which entities we are talking about in these contracts and they don't want that detail.

Speaker Change: Chaired by me.

Speaker Change: So we really just have to sort of keep it at a high level when we talk about these sorry.

Speaker Change: That's all right.

Richard Anthony Neaton: That's all right. My next question is... You talked about AI accelerators and using FPGAs instead of other types of chips to accelerate AI functions in your funnel. Are there more than one of these AI opportunities in your funnel? And... Are there more that are outside of the funnel, more than two years?

Speaker Change: My next question is.

Speaker Change: You talked about a guy accelerators and using F. P. G H.

Speaker Change: Instead of other types of chips to accelerate functions.

Speaker Change: In your funnel.

Speaker Change: Are there.

Speaker Change: More than one of these AI opportunities in your funnel.

Speaker Change: And.

Speaker Change: Are there more that are outside of the funnel and more than two years out.

Speaker Change:

Speaker Change: Yes, and yes.

Brian C. Faith: Some of the recent proposals that I was just talking about have AI as part of them; that was a key element of them. [inaudible] The FPGA that we have today, and the ESPGA that we have today, I think can bring value to AI and acceleration, which is evident in that 12 nanometer one we've already talked about previously. But I think more importantly, the further we get into this and the more research that's done gives us clues about how we can even further adapt our ESPGA architecture to even better accelerate for performance or lower power reasons other chip designs that we have in the future.

Speaker Change: Some of the recent proposals, but I was just talking about how AI as part of them I would say a key element of it.

Speaker Change: And.

Speaker Change: F. P. J that we have today E. S. P. J that we have today I think can bring value to AI and acceleration, which is evident in that 12 nanometer when we've already talked about previously.

Speaker Change: More importantly, the further we get into this and the more research that's done.

Speaker Change: Who is about how we can even adapt further.

Speaker Change: P J architecture to even better accelerate for performance or lower power reasons.

Speaker Change: Other chip designs that we have in the future and so some of the proposals we have mentioned on this call already.

Brian C. Faith: And so some of the proposals we have mentioned on this call already are about that, more acceleration and lower power through other variations of our VFPG architecture. So yeah, there's definitely some in the funnel, dollar value, the funnel opportunities we talked about, and there are some things that would be storefront that's outside the sales funnel number, but not opportunity. Generally, the opportunities we're tracking and prioritizing are ones that would contribute to revenue within the next two years, if it's outside of that. We tend to push that down the priorities that quickly.

Speaker Change: Our about that more more acceleration of our power through other variations of argue it P. J architecture. So yeah, there's definitely some of the funnel dollar value of that funnel of opportunities, we talked about and there are some things that would be storefront that's outside the sales funnel number.

Speaker Change: But not opportunities generally the opportunities that we're tracking and prioritizing are ones that would contribute to revenue within the next two years, if it's outside of that.

Speaker Change: We tend to push that down the priorities that quick.

Richard Anthony Neaton: Thank you for that detail. In terms of AI... Are FPGAs better suited for AI at the edge, or are you seeing across the board AI use cases seeking to investigate the benefits of FPGAs everywhere in the network?

Speaker Change: Thank you for that detail.

Speaker Change: In terms of AI.

Our FPGA is better suited for AI.

AI at the edge.

Sure.

Speaker Change: Are you seeing across the board he I use cases.

Speaker Change: Seeking.

Speaker Change: To investigate the.

Speaker Change: Benefits is that D G everywhere in the network.

Speaker Change: I think historically F P J as had been used more.

Brian C. Faith: I think historically FPGAs have been used more, in the Central Data Center for AI, and not so much at the Edge because... Typical FPGAs tend to be much higher power because they're designed for flat-out performance at any cost, and one of those costs tends to be power. As you've been following QuickLogic for a long time, you know that a lot of our FPGA wins are, in fact, on the other end of the spectrum, which tend to be on the cost and power side of the equation, where we optimize for power first.

Speaker Change: And the Central data center for AI and not so much at the edge because.

Speaker Change: Typical FPGA is tend to be much higher power.

Speaker Change: Because they're designed for flat outperformance at any cost in one of those cost tends to be powered.

Speaker Change: As you know following quick logic for a long time, you know that you know a lot of our FPGA wins in factor on the other end of the spectrum, which tend to be on the cost and power side of the equation will be optimized for power first.

Brian C. Faith: And so, I think that's one of the reasons why we were able to win this 12-nanometer design we talked about earlier, because that one's AI at the edge, where power really, really does matter, and where we already have success from our prior FPGA history as a company. Think about all the smartphone stuff with KSR. Obviously, power is really important in those applications. Now, if you think to the future, though, I think there are more ASIC customers looking at how they design for power at the edge and performance at the edge, and this is where adding a modest amount of programmable logic to their ASIC can actually help them optimize for those lighter workloads for AI at the edge without killing their power budget and their die-sized budget.

Speaker Change: So the.

Speaker Change: I think that's one of the reasons why we were able to win there's 12 nanometer at a time, we talked about earlier because that months AI at the edge, where power really really does matter and where we already have success from our Pryor at P. J and history as a company think about all the smartphone stomach cancer, obviously power is really important in those applications.

Speaker Change: Now if you think to the future though.

I think there are more used.

Speaker Change: <unk> customers looking at how do they designed for power at the edge.

Speaker Change: And performance at the edge and this is we're adding a modest amount of programmable logic to their ASIC can actually help them optimize for those lighter workloads for AI at the edge without killing of the power budget in there their die size budget. So we see a lot of opportunity there.

Speaker Change: But I think it.

Brian C. Faith: So we see a lot of opportunity there. But I think, you know, it would be hard to overcome the press and the excitement around data-centered AI because that's dominating everything that we hear in the news today, right?

Speaker Change: It would be hard to overcome the press and the.

Speaker Change: The excitement around data center AI, because that's dominating everything that we hear in the news today right.

Speaker Change: Right.

Speaker Change: Yeah.

Richard Anthony Neaton: One final question as it relates to some of your.. defense contract opportunities and the RAD-HARD contract that we've talked about for several quarters now. Does U.S. federal government budget uncertainty sometimes affect how these tranches are awarded and when they're awarded?

Speaker Change: One final question as it relates to some of your.

Speaker Change: Defense contract opportunities in the Rad hard on a contract that we've talked about.

Speaker Change: For several quarters now.

Speaker Change: Do the.

Federal government budget uncertainties.

Speaker Change: <unk> come up to affect sometimes how these tranches are awarded and when they are rewarded.

Speaker Change: I'm sure there is some impact from the third of a budgeting process on these projects because at the end of the day the budget has to come from somewhere.

Brian C. Faith: Some impact from the budgeting process on these projects because, at the end of the day, the budget has to come from somewhere, but I think usually, if you look at it this way, this is shit.

Usually if you look at it.

Speaker Change: D.

Brian C. Faith: Firstly, the program that we have, I think there's a need for it, we're executing well, and so I think those are the types of programs that are going to continue to get priority from the budgeting process. I think the other thing I would note is that the awards that we're getting, the chances we're getting, are generally not, like, multi-year tranches, and so I think they're, my belief anyway, is that they're already allocated within the budget of that year, and so that doesn't become such an issue.

Speaker Change: Firstly the program that we have I think there was a need for it we're executing well and so I think those are the types of programs that are going to continue to get priority from a budgeting process.

Speaker Change: I think the other thing I would note is that.

Are the awards that we're getting the traction we're getting are generally not like multi year tranches and so I think there my beliefs anyway that they are already allocated for within the budgeted out here and so that doesn't become.

Speaker Change: Such an issue if we were getting for seeking you know multi year awards and I think I, probably wouldnt, maybe become more at risk to the government budgeting cycle.

Brian C. Faith: If we were getting, or seeking, you know, multi-year awards, then I think that probably would maybe become more at risk to the government budgeting cycle. But for the ones that we have, I don't foresee that to be an issue. And really, if you think about the magnitude of the awards we're talking about, it's a.., and also De Minimis in the grand scheme of things from the defense spending overall.

Speaker Change: For the ones that we don't foresee that Joe and issue and really if you think about the magnitude of your words were talking about it so.

Speaker Change: It's a de Minimis in the Grand scheme of things for me.

Speaker Change: First spending overall anyway.

Speaker Change: Okay. Thanks, Brian Thanks for your detail.

Richard Anthony Neaton: Thanks, Brian. Thanks for your detail.

Thanks, Rick.

Speaker Change: As a reminder, ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad.

Operator: As a reminder, ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad. And our next question will come again from the line of Richard Shannon with Craig Hallam. Please proceed. Well, hi guys. Brian, I just have one follow-up.

Speaker Change: And our next question will come again from the line of Richard Shannon with Craig Hallum. Please proceed.

Speaker Change: Yeah.

Richard Cutts Shannon: Hi, guys.

Richard Cutts Shannon: Hi guys. Brian, I just have one follow-on question, kind of a big picture, and that's really looking at the competitive environments in the embedded FPGA IP space. How would you compare the environment versus one or two years ago?

Brian I guess just have one follow on question kind of Big picture and that's really looking at the competitive environment 70 embedded FPGA IP space how.

Richard Cutts Shannon: How would you kind of compare the environment versus one or two years ago is that correct.

Speaker Change: Richard are you there.

Speaker Change: Okay.

Operator: Richard, can you go back on the queue? Hey, Richard. Brian, can you hear me? Yeah, I can hear you now, but the audio cut out when you started to ask the question about the competitive landscape over the last couple of years. Could you repeat the question, please? Certainly. Can you hear me?

Speaker Change: Uh huh.

Speaker Change: Back in the queue.

Hey, Richard.

Richard Cutts Shannon: Okay, I don't know why that went out. Sorry about that.

Speaker Change: Brian can you hear me.

Richard Cutts Shannon: Yeah, I think in your audio.

Brian C. Faith: I can hear you now, but the audio cut out.

Speaker Change: When you guys started to ask a question about the competitive landscape over the last couple of years.

Speaker Change: Repeat the question please.

Speaker Change: It certainly can you hear me now.

Speaker Change: Yes, I can.

Operator: Yeah, so my general question here is about the competitive environment versus one or two years ago. How, if any, has it changed, better or worse? You've seen more or less competitors out there. Any kind of changes in the competitive dynamics here that have been favorable or unfavorable to you in that time?

Okay, I don't know why that went out sorry about that yeah. So my my General question here is on the competitive environment versus a one or two years ago. How if any has it changed better or worse, you're seeing more or less competitors out there any kind of changes in the competitive dynamics here that are been favorable or unfavorable to you in that time frame.

Speaker Change: Yeah, So I guess on the competitive landscape.

Brian C. Faith: Yeah, so I guess on the competitive landscape. If you go back a couple years, I'd say the competitive landscape that we see is pretty unchanged. We see FlexLogix, we see Menta, we don't really see Acronix because our understanding is they're really just on one node.

Speaker Change: If you go back a couple of years I'd say the competitive landscape that you see is it's pretty unchanged.

Brian C. Faith: But the other two, those are the two that we would come across in any type of engagement that's a pure IP-based engagement. If you double-click on that a little further, I think Mensa is pretty open about their soft IP, and FlexLogic and QuickLogic are pretty open about their hard IP. And we think there are good reasons for doing hard IP, taking on that workload for the customer, so it makes our customers' lives easier.

Speaker Change:

Speaker Change: We see you know.

Speaker Change: Projects, we see meant Uh huh.

Speaker Change: We don't really see a chronic because my understanding is they're really just on one node.

Speaker Change: But the other two we those are the two that we would come across any type of engagement that the pure IP based engagement.

Speaker Change: If you double click on that a little further.

Speaker Change: Think Memphis pretty open that their soft IP.

Speaker Change: Plus subjects and quick classic a pretty open that we're hard at it and we think there's good reasons for doing hard oaky.

Speaker Change: Taking on that workload for the customer so it makes our customers life easier.

Brian C. Faith: If you double-click a little further on the differences between the companies, I think this is one of the things I was trying to bring out in the... The closing remarks that I had, but so many of our customers appreciate the fact that we eat our own dog food and we've been doing devices, both design and support, and selling for three decades.

Speaker Change: If you double click a little further on the differences.

Speaker Change: Between the companies I think this is one of the things I was trying to bring out M D.

Speaker Change: The closing remarks that I had.

Speaker Change: But so many of our customers appreciate the fact that we eat our own dog food and we've been doing.

Speaker Change: As both design and support and selling for three decades.

Brian C. Faith: And so we know not just how to build a core, but how to build a core for making it easier for people to use, including manufacturing, test, and performance, and then making the software represent that silicon really well. And it's not just about making the core work well, but it's also about that option for doing device development. And you can see that a lot of the larger contract values that we're talking about actually include development of the device with the long-term vision of standing up the storefront for those devices.

Speaker Change: And so we know not just how to build a core but I had to build a core for making it easier for people to use including manufacturing and test and performance and then making the software represent that silicon really well.

Speaker Change: And it's not just about making a corridor work well, but it's also about that option for giving device development and you can see a lot of the larger contract values that we're talking about actually include <unk>.

Speaker Change: Development of the device with the the long term vision of standing up the storefront for those devices.

Brian C. Faith: And I think that's important, not just from a QuickLogic business and investor perspective, but it's important for our customers also because FPGA technology is relatively new as a core, as you allude to in your question, and I think people get more comfortable working with established companies that have been basically using and supporting that type of technology for decades. And that's one of the attraction points that we're seeing in these different proposals.

Speaker Change: And I think that's important not just from a quick logic business and investor perspective, but it's important for our customers also because.

Speaker Change: S. P. J technology is relatively new as a core as you alluded to in your question.

Speaker Change: And I think people get more comfortable working with established companies that have been basically using and supporting those that type of technology for decades, and that's one of the attraction points that we're seeing in these these different proposals even I have examples where somebody started out by talking to US is an FPGA vendor and then pivoting that into doing the device for them.

Brian C. Faith: I even have examples where somebody started out by talking to us as an FPGA vendor and then pivoting that into doing the device for them because they'd be using, you know, more FPGA-gated content than not. So why not?

Speaker Change: Is it because you know more at the J&J contact and not so why not you know the next that makes logical sense for the customer.

Brian C. Faith: You know, that makes logical sense for the customer. So those are the kinds of dynamics we're seeing. I think we're starting to see more people interested in not just the leading-edge technologies but also some of what we would call mainstream technologies, as evidenced by our winds, which we're talking about going across different foundries now on some of the more mainstream nodes. It feels like we're starting to get people that are more comfortable with technology now, and they don't need to be taught what an EFPGA is, but it's more like, how can they make it useful for them.

Speaker Change: So those are the kinds of dynamics we're.

Speaker Change: We're seeing I think are you starting to see more and more people interested in not just the leading edge technologies, but also some of what we would call mainstream technologies as evidenced by our our Windsor, we're talking about going across different foundries now on some of the more mainstream node. So.

Speaker Change: It feels like we're starting to get people that are more comfortable with technology now and they don't need to be taught with an E. P. J, yes, but it's more like how can I make it useful for them.

Richard Cutts Shannon: And so I think it's good that those conversations are happening because it means that the technology itself is not so nascent anymore. Alright, is that helping answer your question? If you have a follow-up, please let me know. Yeah, that all makes sense. Just want to make sure I'm kind of keeping a pulse on the latest, and I appreciate your perspective. That's all from me, Brian. Thank you.

Speaker Change: So I think it's good but those conversations are happening because it means that the technology itself is not sort of a nascent anymore.

Speaker Change: Alright that helps.

Speaker Change: Helping us your question if you have fallen so yeah.

Speaker Change: Yeah, that'll that'll make sense, just want to make sure im a kind of keeping a pulse on the on the latest and I. Appreciate your perspective, that's all for me. Thank you.

Speaker Change: Thanks Richard.

Speaker Change: Yeah.

Speaker Change: Thank you ladies and gentlemen.

Brian C. Faith: Thank you, ladies and gentlemen. We have reached the end of the question and answer session. I'd like to turn the call back to Brian Faith for his closing remarks.

Speaker Change: Yeah.

Speaker Change: We have reached the end of the question and answer session.

Speaker Change: To turn the call back to Brian Faith for closing remarks.

Brian C. Faith: All right, well, I wanted to thank everybody for your continued support, and we look forward to sharing our progress with you next quarter. Have a great day. Thank you.

Brian C. Faith: Well I wanted to thank everybody for your continued support and we look forward to sharing our progress with you next quarter have a great day. Thank you.

Speaker Change: This concludes today's conference.

Operator: This concludes today's conference. You may now disconnect your lines at this time. Thank you for your participation.

Speaker Change: You may now disconnect your lines at this time.

Speaker Change: You for your participation.

Speaker Change: Yeah.

Speaker Change: [noise] [noise].

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Okay.