Q2 2024 QuickLogic Corp Earnings Call

August 13, 2024

Ladies and gentlemen, good afternoon. At this time, I would like to welcome everyone to QuickLogic Corporation's second quarter fiscal 2024 earnings results conference call.

Operator: Corporation's Second Quarter Fiscal 2024 Earnings Results Conference Call. As a reminder, today's call is being recorded for replay purposes through August 20th, 2024. I would now like to turn the conference over to Ms. Alison Ziegler of Daro Associates. Ms. Ziegler, please go ahead.

Operator: Corporations, Second Quarter, fiscal 2024, Earnings Results Conference Call. As a reminder, today's call is being recorded for replay purposes through August 20, 2024.

As a reminder, today's call is being recorded for replay purposes through August 20, 2024. I would now like to turn the conference over to Ms. Allison Ziegler of Darrow Associates. Ms. Ziegler, please go ahead.

Alison Ziegler: I would now like to turn the conference over to Miss Alison Ziegler of Dario Associates. Miss Ziegler, 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.

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, including the expected timing of such revenue, statements regarding our future profitability and cash flows, statements regarding the timing, milestones, and payments related to QuickLogic's government contracts, 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, 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, growth margin, operating expenses, profitability, and cash. Actual results or trends may differ materially from those discussed today.

Alison Ziegler: 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. 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.

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.

Alison 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. Such information may be deemed material information, and QuickLogic may use these channels to comply with its disclosure obligations under Regulation. 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. Thank you, Alison.

Alison Ziegler: 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, including the expected timing of such revenue, statements regarding our future profitability and cash flows, statements regarding the timing, milestones, and payments related to QuickLogic's government contracts, statements pertaining to QuickLogic's future performance, design activity, and its ability to convert new design opportunities into production shipment, timing and market acceptance of its customers' products, schedule changes, and production start dates that could impact the timing of shipment, the company's future evaluation systems, broadening the number of our ecosystem partners, and expected results and financial expectations for revenue, growth margin, operating expenses, profitability, and cash.

Speaker Change: 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.

Brian Faith: As Elias will cover in detail, we anticipate revenue in Q3 will be up slightly from Q2, followed by a very sharp rebound in Q4 to realize a revised full-year growth projection. I will walk you through the status of our major contracts, but first, I want to make a few things absolutely clear. We did not lose any of the contracts to competitors that we expected would contribute to the 30% growth, and none of the pushouts were due to delays caused by QuickLogic.

Speaker Change: including the expected timing of such revenue, statements regarding our future profitability and cash flows, statements regarding the timing, milestones, and payments related to QuickLogic's government contracts,

Brian Faith: We are performing on or ahead of schedule on all contracts and pending proposals. We also have deliverable schedules to support the majority of the implied revenue outlook for Q4. Only one of the pushouts involves a significant contract that we discussed in our quarterly conference call.

Brian Faith: I will cover that to the extent I can as I update you on the status of major contracts. The balance of the pushouts are smaller deals that we believe will generate revenue beginning in early 2025. I say beginning in 2025 because most of the IP contracts have the potential to generate revenue for years beyond the IP deliverable state.

Speaker Change: statements pertaining to QuickLogic's future performance, design activity, and its ability to convert new design opportunities into production shipments.

Speaker Change: Timing and market acceptance of its customers' products.

Speaker Change: 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.

Brian Faith: As I've noted in past calls, the IP deliverables phase, which has driven high growth and record profit margins, is actually the foundation for our larger business model. We expect IT revenue to rebound sharply in Q4 of this year and that demand from an expanding base of customers will accelerate revenue growth going forward. In addition, we believe revenue from our next phase, which includes storefront and chiplet, will layer on beginning in late 2025.

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 recent leaf 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.

Speaker Change: 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.

Operator: Corporations, Second Quarter, fiscal 2024, Earnings Results Conference Call. As a reminder, today's call is being recorded for replay purposes through August 20, 2024.

Speaker Change: 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.

Alison Ziegler: In today's call, we will be reporting non-GAAP financial measures. You may refer to the earnings release we issued today for a detailed reconciliation of our GAAP to non-GAAP results and other financial statements. We have also posted an updated financial table on our IR webpage that provides current and historical non-GAAP data.

Speaker Change: 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.

Alison Ziegler: I would now like to turn the conference over to Miss Alison Ziegler of Dario Associates. Miss Ziegler, 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 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, including the expected timing of such revenue, statements regarding our future profitability and cash flows, statements regarding the timing milestones and payments related to QuickLogic's government's contracts, statements pertaining to QuickLogic's future performance, design activity and its ability to convert new design opportunities into production shipment, timing and market acceptance of its customer's products, schedule changes and production start dates that could impact the timing of shipment, the company's future evaluation systems, broadening the number of our ecosystem partners, and expected results and financial expectations for revenue, growth margin, operating expenses, profitability and cash.

Speaker Change: We have also posted an updated financial table on our IR web page that provides current and historical non-GAAP data.

Alison Ziegler: Please note, QuickLogic uses its website, the company blogs, corporate Twitter accounts, Facebook page, and LinkedIn page as channels of distribution of information about its business. Such information may be deemed material information. QuickLogic may use these channels to comply with its disclosure obligations under Regulation FD.

Speaker Change: 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.

Speaker Change: and QuickLogic may use these channels to comply with its disclosure obligations under Regulation FD. A copy of the prepared remarks made on today's call will be posted 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.

Alison Ziegler: A copy of the prepared remarks made on today's call will be posted on QuickLogic's IR webpage shortly after the conclusion of today's earnings call.

Brian Faith: I would now like to turn the call over to Brian. Thank you, Allison. Good afternoon, everyone, and thank you all for joining our second quarter 2024 conference call. We have made tremendous progress during the first seven months of 2024.

Brian Faith: Let's take a few minutes now to update the status of some of our major contracts and accomplishments. On July 8th, we announced the award of the third tranche of the Strategic Radiation Hardened FPGA contract that was initiated in August 2022. The value of this tranche is $5.26 million, and as we forecasted in our last two conference calls, it has a funding rate similar to tranche one.

Brian Faith: Thank you, Allison. Good afternoon, everyone, and thank you all for joining our second quarter 2024 conference call.

Brian Faith: We have made tremendous progress during the first seven months of 2024.

Brian Faith: Unfortunately, that progress is overshadowed by some scheduling pushouts that cause us to lower our full-year growth projection to 15%. As the last we'll cover in detail, we anticipate revenue in Q3 will be up slightly from Q2, followed by a very sharp rebound in Q4 to realize our revised full-year growth projections.

Speaker Change: Unfortunately, that progress is overshadowed by some scheduling push-outs that cause us to lower our full-year growth projection to 15%.

Brian Faith: The higher-than-anticipated cash usage during Q2 is mostly attributable to the timing of our strategic radiation-hardened contract. As Elias will discuss, the payments received in Q3 that we anticipated in Q2 will benefit Q3 cash flow. Tronch3 funds the continued development of strategic radiation-hardened FPGA technology, support identified and future DOD strategic and space system requirements. The total potential for this contract, including future options, is $72 million

Speaker Change: As Elias will cover in detail, we anticipate revenue in Q3 will be up slightly from Q2, followed by a very sharp rebound in Q4 to realize our revised full-year growth projection.

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 recent leaf 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-gap financial measures.

Brian Faith: I will step you through the status of our major contracts, but first I want to make a few things absolutely clear. We did not lose any of the contracts to competitors that we expected would contribute to the 30% growth. And none of the pushouts were due to delays caused by QuickLogic. We are performing on or ahead of schedule on all contracts and pending proposals. We also have deliverable schedules to support the majority of the implied revenue outlook for Q4.

Brian Faith: If these options are exercised, we expect the funding rate will increase significantly in 2025. Furthermore, beyond building on the success of our large government contract, we are very well positioned to significantly expand our EFPGA hard IP business across many new customers and market sectors, as well as the number of fabrication nodes supported by our IP in 2024 and beyond. With the award of Tronch III, we moved $5.26 million from our sales funnel to book business and more than replaced it with new opportunities. The result was a net increase to $189 million.

Elias Nader: I will step you through the status of our major contracts but first I want to make a few things absolutely clear.

Elias Nader: We did not lose any of the contracts to competitors that we expected would contribute to the 30% growth.

Elias Nader: And none of the pushouts were due to delays caused by QuickLogic.

Elias Nader: We are performing on or ahead of schedule on all contracts and pending proposals.

Alison Ziegler: You may refer to the earnings release we issued today for a detailed reconciliation of our gap to non-gap results and other financial statements. We have also posted an updated financial table on our IR webpage that provides current and historical non-gap data. Please note, QuickLogic uses its website, the company blogs, corporate Twitter accounts, Facebook page, and LinkedIn page as channels of distribution of information about its business. Such information may be deemed material information. QuickLogic may use these channels to comply with its disclosure obligations under regulation FD.

Elias Nader: We also have deliverable schedules to support the majority of the implied revenue outlook for Q4.

Brian Faith: Only one of the pushouts involves a significant contract that we've discussed in our quarterly conference calls. I will cover that to the extent I can as I update you on the status of major contracts. The balance of the pushouts are smaller deals that we believe will generate revenue beginning at early 2025. I say beginning in 2025 because most of the IP contracts have the potential to generate revenue for years beyond the IP deliverable fees.

Speaker Change: Only one of the push-ups involves a significant contract that we've discussed in our quarterly conference calls. I will cover that to the extent I can as I update you on the status of major contracts.

Speaker Change: The balance of the pushouts are smaller deals that we believe will generate revenue beginning at early 2025.

Speaker Change: I say beginning in 2025 because most of the IP contracts have the potential to generate revenue for years beyond the IP deliverable space.

Brian Faith: As I've noted in past calls, the IP deliverables phase, which has driven high growth in record profit margins, is actually the foundation for our larger business model. We expect IP revenue will rebound sharply in Q4 this year and that demand from an expanding base of customers will accelerate revenue growth going forward. In addition, we believe revenue from our next phase, which includes storefront and chiplet, will layer on beginning in late 2025.

Alison Ziegler: A copy of the prepared remarks made on today's call will be posted on QuickLogic's IR webpage shortly after the conclusion of today's earnings call.

Speaker Change: [inaudible]

Speaker Change: As I've noted in past calls, the IP deliverables phase, which has driven high growth and record profit margins, is actually the foundation for a larger business model.

Brian Faith: I would now like to turn the call over to Brian. Thank you, Allison.

Brian Faith: Good afternoon, everyone, and thank you all for joining our second quarter 2024 conference call. We have made tremendous progress during the first seven months of 2024. Unfortunately, that progress is overshadowed by some scheduling pushouts that cause us to lower our full-year growth projection to 15%. As the last we'll cover in detail, we anticipate revenue in Q3 will be up slightly from Q2 followed by a very sharp rebound in Q4 to realize our revised full-year growth projections.

Speaker Change: We expect IP revenue will rebound sharply in Q4 this year, and that demand from an expanding base of customers will accelerate revenue growth going forward.

Speaker Change: In addition, we believe revenue from our next phase, which includes storefront and chiplet, will layer on beginning in late 2025.

Brian Faith: Within this, there are numerous outstanding proposals, including three new RFPs with major customers totaling approximately $8 million that we have submitted during the last month alone. Given its two-year outlook, the funnel is also beginning to capture specific storefront and chiplet opportunities that we believe will begin to materialize late in 2025. On June 18th, we announced that we joined the Intel Foundry's Accelerator IP and U.S. Military, Aerospace, and Government Alliance. This marks a significant milestone in the company's strategic growth plan, driven by customer demand and to capitalize on the already considerable interest from companies targeting the Intel 18A technology for new designs.

Brian Faith: Let's take a few minutes now to update the status of some of our major contracts and accomplishments. On July 8, we announced the award at the third tranche of the strategic radiation heart and FPGA contract that was initiated in August 2022. The value of this tranche is $5.26 million, and as we forecasted in our last two conference calls, it has a funding rate similar to tranche 1. The higher than anticipated cash usage during Q2 is mostly attributable to the timing of our strategic radiation heart and contract. As Elias will cover, the payments received in Q3 that we anticipated in Q2 will benefit Q3 cash flow.

Brian Faith: We have initiated the development of our HART IP. We believe this will position QuickLogic as a leading source for EFPGA hard IP optimized for Intel 18A. Combined with the unique ability of our Astralis ESPGA hard IP generator to quickly develop customer-defined hard IP cores, we will be well positioned to win contracts and accelerate the schedule of our deliverables. On May 28, we announced that QuickLogic received the BAE Systems Partner to Win Supplier of the Year Award in the category of Fast Labs Technology Innovation Partner of the Year.

Speaker Change: Let's take a few minutes now to update the status of some of our major contracts and accomplishments.

Speaker Change: On July 8th, we announced the award at the third tranche of the Strategic Radiation Hardened FPGA contract that was initiated in August 2022.

Speaker Change: The value of this tranche is $5.26 million, and as we forecasted in our last two conference calls, it has a funding rate similar to tranche one.

Speaker Change: The higher-than-anticipated cash usage during Q2 is mostly attributable to the timing of our strategic radiation-hardened contract.

Speaker Change: As Elias will cover, the payments received in Q3 that we anticipated in Q2 will benefit Q3 cash flow.

Elias Nader: Tronch III funds the continued development of strategic radiation hardened FPGA technology to support identified and future DOD strategic and space system requirements.

Elias Nader: The total potential for this contract, including future options, is $72 million.

Elias Nader: If these options are exercised, we expect the funding rate will increase significantly in 2025.

Brian Faith: Beyond building on the success of our large government contract, we are very well positioned to significantly expand our EFPGA heart IP business across many new customers and market sectors, as well as the number of fabrication nodes supported by our IP in 2024 and beyond. With the award of tranche 3, we moved $5.26 million from our sales funnel to both business and more than replaced it with new opportunities. The result is in that increase to $189 million. Within this, there are numerous outstanding proposals, including three new RFPs with major customers totaling approximately $8 million that we have submitted during the last month alone.

Elias Nader: Beyond building on the success of our large government contract, we are very well positioned to significantly expand our EFPGA hard IP business.

Elias Nader: across many new customers and market sectors, as well as the number of fabrication nodes supported by our IP in 2024 and beyond.

Elias Nader: With the award of Tranche 3, we moved 5.26 million dollars from our sales funnel to both business and more than replaced it with new opportunities.

Brian Faith: Let's take a few minutes now to update the status of some of our major contracts and accomplishments.

Elias Nader: The result is a net increase to $189 million.

Elias Nader: Within this, there are numerous outstanding proposals, including three new RFPs with major customers totaling approximately $8 million that we have submitted during the last month alone.

Brian Faith: On July 8, we announced the award at the third tranche of the strategic radiation heart and FPGA contract that was initiated in August 2022. The value of this tranche is $5.26 million and as we forecasted in our last two conference calls, it has a funding rate similar to tranche 1. The higher than anticipated cash usage during Q2 is mostly attributable to the timing of our strategic radiation heart and contract. As Elias will cover, the payments received in Q3 that we anticipated in Q2 will benefit Q3 cash flow.

Brian Faith: Given its two-year outlook, the Sunnel is also beginning to capture specific storefront and chipplet opportunities that we believe will begin to materialize late in 2025.

Elias Nader: Given its two-year outlook, the funnel is also beginning to capture specific storefront and chiplet opportunities that we believe will begin to materialize late in 2025.

Brian Faith: On June 18th, we announced that we joined the Intel Foundry's Accelerator IP and U.S. Military Aerospace and Government alliances. This marks a significant milestone in the company's strategic growth plan. Driven by customer demand and to capitalize on the already considerable interest from companies targeting the Intel AT&A technology for new designs, we have initiated development of our hard IP. We believe this will position QuickLogic as a leading source for VFPGA hard IP optimized for Intel AT&A. Combined with the unique ability of our Australia's ESPGA hard IP generator to quickly develop customer-defined hard IP cores, we will be well positioned to win contracts and accelerate the schedule of our deliverables.

Elias Nader: [inaudible]

Elias Nader: On June 18th, we announced that we joined the Intel Foundry's Accelerator IP and U.S. Military, Aerospace, and Government alliances.

Elias Nader: This marks a significant milestone in the company's strategic growth plan.

Brian Faith: Tranche 3 funds the continued development of strategic radiation heart and FPGA technology to support identified and future DOD strategic and space system requirements. The total potential for this contract, including future options, is $72 million. If these options are exercised, we expect a funding rate will increase significantly in 2025. Beyond building on the success of our large government contract, we are very well positioned to significantly expand our EFPGA heart IP business across many new customers and market sectors, as well as the number of fabrication notes supported by our IP in 2024 and beyond.

Elias Nader: Driven by customer demand and to capitalize on the already considerable interest from companies targeting the Intel 18a technology for new designs, we have initiated development of our hard IP.

Elias Nader: We believe this will position QuickLogic as a leading source for EFPGA hard IP optimized for Intel 18a.

Elias Nader: Combined with the unique ability of our Astralis ESPGA hard IP generator to quickly develop customer-defined hard IP cores, we will be well positioned to win contracts and accelerate the schedule of our deliverables.

Brian Faith: On May 28th, we announced that QuickLogic received the BAE Systems Partner to Win Supplier of the Year Award in the category of Fast Labs Technology Innovation Partner of the Year. During our last conference call, I announced that we booked our second contract that will be fabricated using a 12-millimeter process. The first contract is with a defense industrial-based customer and will be fabricated on Global Foundry's 12-millimeter process known as 12LP. We are on schedule to complete our deliverables on two cores and recognize revenue during the second half of 2024. The second contract is with a large international company that I'm sure you would recognize.

Elias Nader: On May 28th, we announced that QuickLogic received the BAE Systems Partner to Win Supplier of the Year Award in the category of Fast Labs Technology Innovation Partner of the Year.

Brian Faith: With the award of tranche 3, we moved $5.26 million from our sales funnel to both business and more than replaced it with new opportunities. The result is in that increase to $189 million. Within this, there are numerous outstanding proposals, including three new RFPs with major customers totaling approximately $8 million that we have submitted during the last month alone. Given its two-year outlook, the Sunnel is also beginning to capture specific storefront and chipplet opportunities that we believe will begin to materialize late in 2025.

Brian Faith: During our last conference call, I announced that we had booked our second contract that would be fabricated using a 12 nanometer process. The first contract is with a defense industrial based customer and will be fabricated on GlobalFoundry's 12 nanometer process known as 12LP. We are on schedule to complete our deliverables in two quarters and recognize revenue during the second half of 2024. The second contract is with a large international 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. This design will be fabricated by TSMC on its 12-nanometer processor.

Elias Nader: During our last conference call I announced that we booked our second contract that will be fabricated using a 12 nanometer process.

Elias Nader: The first contract is with a defense industrial based customer and will be fabricated on Global Foundry's 12 nanometer process known as 12LP.

Elias Nader: We are on schedule to complete our deliverables on two quarters and recognize revenue during the second half of 2024.

Elias Nader: The second contract is with a large international 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.

Brian 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 12-millimeter process. Within the SOC, our ESPGA 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 ESPGA technology than a processor running the acceleration algorithms and software. We are on schedule to complete our deliverables for this core and recognize revenue during the second half of 2024. We are also working closely with this customer on a new design proposal.

Brian Faith: On June 18th, we announced that we joined the Intel Foundry's Accelerator IP and US Military Aerospace and Government alliances.

Elias Nader: This design will be fabricated by TSMC on its 12 nanometer process.

Brian Faith: This marks a significant milestone in the company's strategic growth plan. Driven by customer demand and to capitalize on the already considerable interest from companies targeting the Intel AT&A technology for new designs, we have initiated development of our hard IP. We believe this will position QuickLogic as a leading source for VFPGA hard IP optimized for Intel AT&A. Combined with the unique ability of our Australia's ESPGA hard IP generator to quickly develop customer-defined hard IP cores, we will be well positioned to win contracts and accelerate the schedule of our deliverables.

Brian Faith: Within the SoC, our EFPGA 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. We are on schedule to complete our deliverables for this Corps and recognize revenue during the second half of 2024. We are also working closely with this customer on a new design proposal.

Elias Nader: Within the SOC, our EFPGA is used for AI acceleration, which is a necessary function in most AI applications.

Elias Nader: 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.

Elias Nader: We are on schedule to complete our deliverables for this Corps and recognize revenue during the second half of 2024. We are also working closely with this customer on a new design proposal.

Brian Faith: In November 2022, I shared that we taped out a new device for a customer that incorporates our ESPGA hard IP. Do the strict confidentiality requirements? I can't share more details on the specific design than beyond a brief update. In line with what I covered during our last conference call, the customers continuing to work through certain aspects of the design. Last quarter, I stated that we anticipated resuming our efforts on this design during the second half of 2024.

Brian Faith: In November 2022, I shared that we taped out a new device for a customer that incorporates our EFPGA hard IP. Due to strict confidentiality requirements, I can't share more details on the specific design, and beyond a brief update, in line with what I covered during our last conference call, the customer is continuing to work through certain aspects of the design.

Speaker Change: In November 2022, I shared that we taped out a new device for a customer that incorporates our EFPGA hard IP. Due to strict confidentiality requirements, I can't share more details on the specific design then beyond a brief update.

Speaker Change: in line with what I covered during our last conference call. The customer is continuing to work through certain aspects of the design.

Brian Faith: Last quarter, I stated that we anticipated resuming our efforts on this design during the second half of 2024. However, due to a delay with one of the customer subcontractors, the completion of our deliverables and revenue recognition have been pushed out to 2025. The program is still a solid go and could represent tens of millions of dollars in potential storefront revenue in a couple of years. Last September, we announced that a leading technology company chose our EFPGA hard IP for a design that will be fabricated using Global Foundry's 22FDX platform.

Speaker Change: Last quarter I stated that we anticipated resuming our efforts on this design during the second half of 2024. However, due to a delay with one of the customer subcontractors, the completion of our deliverables and revenue recognition have been pushed out to 2025.

Brian Faith: However, due to a delay with one of the customer subcontractors, the completion of our deliverables and revenue recognition, I have been pushed out to 2025. The program is still a solid go and could represent tens of millions of dollars in potential storefront revenue starting in a couple of years.

Speaker Change: The program is still a solid go and could represent tens of millions of dollars in potential storefront revenue starting in a couple of years.

Brian Faith: Last September, we announced the leading technology company shows our EFPGA heart IP for design that will be fabricated using Global Foundry's 22FDX platform. Again, due to 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 that is now awaiting the availability of a multi-project wafer shuttle at Global Foundry's to move forward.

Brian Faith: The second contract is with a large international 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. This design will be fabricated by TSMC on its 12-millimeter process. Within the SOC, our ESPGA 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 ESPGA technology than a processor running the acceleration algorithms and software.

Speaker Change: Last September we announced the leading technology company chose our EFPGA hard IP for a design that will be fabricated using Global Foundry's 22FDX platform.

Brian Faith: Again, due to 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 who is now awaiting the availability of a multi-project wafer shuttle at GlobalFoundries to move forward. Last November, we announced that Global Semiconductor Leader chose our EFPGA hard IP for a design that will be fabricated on UMC's 22 nanometer process. We have completed the delivery of our IP. Takeout was also completed on schedule, and the customer expects delivery of its first chips during Q3.

Speaker Change: Again, due to 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 that is now awaiting the availability of a multi-project wafer shuttle at GlobalFoundries to move forward.

Brian Faith: Last November, we announced that Global Semiconductor Leader shows our EFPGA heart IP for design that will be fabricated on UMC's 22mm process. We have completed the delivery of our IP. TAPA was also completed on schedule, and the customer expects the delivery of its first chips during Q3. In total, we are on contract to deliver our EFPGA heart IP on six different foundry flash process technology combinations, including two that will be fabricated using 12mm technology.

Speaker Change: Last November we announced that Global Semiconductor Leader chose our EFPGA hard IP4 design that will be fabricated on UMC's 22 nanometer process.

Speaker Change: We have completed the delivery of our IP. Tape-out was also completed on schedule, and the customer expects delivery of its first chips during Q3.

Brian Faith: We are on schedule to complete our deliverables for this core and recognize revenue during the second half of 2024. We are also working closely with this customer on a new design proposal. In November 2022, I shared that we taped out a new device for a customer that incorporates our ESPGA hard IP. Do the strict confidentiality requirements I can't share more details on the specific design than beyond a brief update. In line with what I covered during our last conference call, the customers continuing to work through certain aspects of the design.

Brian Faith: In total, we are on contract to deliver our eFPGA hard IP on six different foundry-slash-process technology combinations, including two that will be fabricated using 12-nanometer technology. In addition to these, we believe we are on track to be a leading company to offer ESPGA hard IP for Intel 18A. In advance of this, we have submitted the first two of what we believe will be many proposals to customers targeting new designs for Intel 18A.

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

Brian Faith: In addition to these, we believe we are on track to be a leading company to offer EFPGA heart IP for Intel 18A. In advance of this, we have submitted the first two of what we believe will be many proposals to customers targeting new designs for Intel 18A. This is up three X from a year ago, with minimal growth in the associated R&D costs. This demonstrates that the market demand for EFPGA heart IP is accelerating and that the automation from our proprietary Australia's IP generator enables us to address this demand in a scalable way. We expect this trend to continue with our leverage becoming even more evident as we increase our 18A engagements.

Speaker Change: In addition to these we believe we are on track to be a leading company to offer ESPGA hard IP for Intel 18a. In advance of this we have submitted the first two of what we believe will be many proposals to customers targeting new designs for Intel 18a.

Brian Faith: This is up 3x from a year ago with minimal growth in the associated R&D costs. This demonstrates that the market demand for ESPGA hard IP is accelerating and that the automation from our proprietary Australis IP generator enables us to address this demand in a scalable way.

Brian Faith: Last quarter, I stated that we anticipated resuming our efforts on this design during the second half of 2024. However, due to a delay with one of the customer subcontractors, the completion of our deliverables and revenue recognition, I have been pushed out to 2025. The program is still a solid go and could represent tens of millions of dollars in potential storefront revenue starting in a couple of years.

Speaker Change: This is up 3x from a year ago with minimal growth in the associated R&D costs.

Speaker Change: This demonstrates that the market demand for ESPGA hard IP is accelerating and that the automation from our proprietary Australis IP generator enables us to address this demand in a scalable way.

Brian Faith: We expect this trend to continue with our leverage becoming even more evident as we increase our 18A engagement. In addition to these awarded contracts, we have a number of large contract proposals pending, some of which have a value in the mid-7 figures. These include major DIB proposals and a pending new proposal with a large semiconductor company. Some of these proposals could end up as storefront designs.

Speaker Change: We expect this trend to continue with our leverage becoming even more evident as we increase our AT&A engagements.

Brian Faith: Last September, we announced the leading technology company shows our EFPGA heart IP for design that will be fabricated using Global Foundry's 22FDX platform.

Brian Faith: In addition to the awarded contracts, we have a number of large contract proposals pending, some of which have a value in the mid-7 figures. These include major DIB proposals and a pending new proposal with a large semiconductor company. Some of these proposals could end up as storefront designs.

Speaker Change: In addition to these awarded contracts, we have a number of large contract proposals pending, some of which have a value in the mid-seven figures.

Brian Faith: Again, due to 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 that is now awaiting the availability of a multi-project wafer shuttle at Global Foundry's to move forward.

Speaker Change: These include major DIB proposals and a pending new proposal with a large semiconductor company.

Brian Faith: In addition to these, we have several chiplet opportunities that are funnel, including potential deals with our partner, Your Chip. We are awaiting feedback from customers on two previously discussed proposals that have a combined value of over $40 million. One is in conjunction with your chip. We're very excited about our partnership with your chip and the pending release of our first jointly developed FPGA chiplet integrating QuickLogic IP in the second half of 2025. Going forward, this FPGA chiplet product line will be expanded to include devices ranging from 40,000 lbs to over 1 million lbs. These chiplets will include a UCI interface, which is supported by industry leaders, including AMD, ARM, Google Cloud, Intel, Meta, Microsoft, Qualcomm, Samsung, and TSMC.

Speaker Change: Some of these proposals could end up as storefront designs.

Brian Faith: In addition to these, we have several chiplet opportunities in our funnel, including potential deals with our partner, Yorkship. We are awaiting feedback from customers on two previously discussed proposals that have a combined value of over $40 million. One is in conjunction with your... We're very excited about our partnership with Yorkship and the pending release of our first jointly developed FPGA chiplet integrating QuickLogic IP in the second half of 2025. Going forward, this FPGA chiplet product line will be expanded to include devices ranging from 40,000 LUTs to over 1 million.

Brian Faith: Last November, we announced that Global Semiconductor Leader shows our EFPGA heart IP for design that will be fabricated on UMC's 22mm process. We have completed the delivery of our IP. TAPA was also completed on schedule and the customer expects the delivery of its first chips during Q3. In total, we are on contract to deliver our EFPGA heart IP on six different Foundry flash process technology combinations, including two that will be fabricated using 12mm technology.

Speaker Change: In addition to these, we have several chiplet opportunities in our funnel, including potential deals with our partner, YourChip. We are awaiting feedback from customers on two previously discussed proposals that have a combined value of over $40 million. One is in conjunction with YourChip.

Speaker Change: We're very excited about our partnership with Yorkship and the pending release of our first jointly developed FPGA chiplet integrating QuickLogic IP in second half 2025.

Speaker Change: Going forward, this FPGA chiplet product line will be expanded to include devices ranging from 40,000 LUTs to over 1 million LUTs.

Brian Faith: These chiplets will include a UCIE interface, which is supported by industry leaders including AMD, ARM, Google Cloud, Intel, Meta, Microsoft, Qualcomm, Samsung, and TSMC. We believe this will enable the rapid adoption of our FPGA chiplet solutions across a very wide variety of applications. In line with our earlier forecast, shipments of EOS S3 to our lead smartphone customer are expected to increase during the first half of 2024. Q3 will be a seasonally low quarter, with volume rebounding in Q4.

Brian Faith: In addition to these, we believe we are on track to be a leading company to offer EFPGA heart IP for Intel 18A. In advance of this, we have submitted the first two of what we believe will be many proposals to customers targeting new designs for Intel 18A. This is up three X from a year ago with minimal growth in the associated R&D costs. This demonstrates that the market demand for EFPGA heart IP is accelerating and that the automation from our proprietary Australia's IP generator enables us to address this demand in a scalable way.

Speaker Change: These chiplets will include a UCIE interface, which is supported by industry leaders including AMD, ARM, Google Cloud, Intel, Meta, Microsoft, Qualcomm, Samsung, and TSMC.

Brian Faith: We believe this will enable the rapid adoption of our FPGA chiplet solutions across a very wide variety of applications.

Speaker Change: We believe this will enable the rapid adoption of our FPGA chiplet solutions across a very wide variety of applications.

Brian Faith: Again, line with our earlier forecast. Shedments of EOS S3 to our lead smartphone customer increase during the first half of 2024. Q3 will be a seasonally low quarter with volume rebounding in Q4. With new designs ramping, we expect shedments will continue through 2025.

Speaker Change: in line with our earlier forecasts.

Speaker Change: shipments of EOS S3 to our lead smartphone customer increased during the first half of 2024.

Brian Faith: We expect this trend to continue with our leverage becoming even more evident as we increase our 18A engagements. In addition to the awarded contracts, we have a number of large contract proposals pending, some of which have a value in the mid-7 figures. These include major dib proposals and a pending new proposal with a large semiconductor company. Some of these proposals could end up as storefront designs. In addition to these, we have several chiplet opportunities that are funnel, including potential deals with our partner, your chip.

Speaker Change: Q3 will be a seasonally low quarter with volume rebounding in Q4.

Brian Faith: With new designs ramping up, we expect shipments will continue through 2025. Consistent with our prior outlook, we are forecasting a modest increase in display bridge shipments, and we now believe mature product revenue will also be up modestly year-over-year. During July, we announced two new distribution agreements, one with Spur Microwave to cover markets across India, and the second with Astute Electronics, which covers Europe, Israel, Turkey, Australia, and New Zealand.

Speaker Change: With new designs ramping, we expect shipments will continue through 2025.

Brian Faith: Insistant with our prior outlook, we are forecasting a modest increase in display bridge shedments, and we now believe mature product revenue will also be up modestly year over year.

Speaker Change: Consistent with our prior outlook, we are forecasting a modest increase in display bridge shipments and we now believe mature product revenue will also be up modestly year over year.

Brian Faith: During July, we announced two new distribution agreements, one with Spur Microwave to cover markets across India and the second with the Stoop Electronics, which covers Europe, Israel, Turkey, Australia, and New Zealand. The primary reason for the expansion of our distribution partners is to address the sharp increase in interest we are seeing in international markets. With EFPGA hard IP established for several of the most popular fabrication processes and our sophisticated software tools, we can address this rapidly growing international demand very efficiently through distribution.

Speaker Change: During July, we announced two new distribution agreements.

Speaker Change: one with Spur Microwave to cover markets across India and the second with Astute Electronics which covers Europe, Israel, Turkey, Australia and New Zealand.

Brian Faith: The primary reason for the expansion of our distribution partners is to address the sharp increase in interest we are seeing in international markets. With EFPGA hard IP established for several of the most popular fabrication processes and our sophisticated software tools, we can address this rapidly growing international demand very efficiently through distribution. On August 7th, we announced our partnership with CTG.

Brian Faith: We are awaiting feedback from customers on two previously discussed proposals that have a combined value of over $40 million. One is in conjunction with your chip. We're very excited about our partnership with your chip and the pending release of our first jointly developed FPGA chiplet integrating QuickLogic IP in second half 2025. Going forward, this FPGA chiplet product line will be expanded to include devices ranging from 40,000 lbs to over 1 million lbs.

Speaker Change: The primary reason for the expansion of our distribution partners is to address the sharp increase in interest we are seeing in international markets.

Speaker Change: With EFPGA hard IP established for several of the most popular fabrication processes and our sophisticated software tools, we can address this rapidly growing international demand very efficiently through distribution.

Brian Faith: On August 7th, we announced our partnership with CTG. CTG will fulfill a role that extends beyond traditional distribution and enable us to significantly expand our scope of coverage within the defense industrial base without increasing our operating expenses. There are literally hundreds of potential programs within the div that could benefit from our IP technology and soon from device solutions like storefront and chiplet. CTG's close collaboration with the div gives them deep knowledge of the programs and key decision makers. There are established programs that ensure long-term inventory support, often standing through customer life cycles that can extend decades.

Brian Faith: CTG will fulfill a role that extends beyond traditional distribution and enable us to significantly expand our scope of coverage within the defense industrial base without increasing our operating expenses. There are literally hundreds of potential programs within the DIV that could benefit from our IP technology and soon from device solutions like Storefront and Chipotle. DTG's close collaboration with the DIB gives them deep knowledge of the programs and key decision makers.

Speaker Change: On August 7th, we announced our partnership with CTG.

Speaker Change: CTG will fulfill a role that extends beyond traditional distribution and enable us to significantly expand our scope of coverage within the defense industrial base without increasing our operating expenses.

Brian Faith: These chiplets will include a UCI interface, which is supported by industry leaders, including AMD, ARM, Google Cloud, Intel, Meta, Microsoft, Qualcomm, Samsung, and TSMC. We believe this will enable the rapid adoption of our FPGA chiplet solutions across a very wide variety of applications. Again, line with our earlier forecast. Shedments of EOS S3 to our lead smartphone customer increase during the first half of 2024. Q3 will be a seasonally low quarter with volume rebounding in Q4.

Speaker Change: There are literally hundreds of potential programs within the DIV that could benefit from our IP technology and soon from device solutions like Storefront and Chiplet.

Speaker Change: PTG's close collaboration with the BIB gives them deep knowledge of the programs and key decision makers.

Brian Faith: Their established programs ensure long-term inventory support, often spanning through customer life cycles that can extend decades. Their support will give us significant leverage by introducing us to programs that could be beyond our directory and pre-qualifying opportunities before we invest. Aurora is our comprehensive software tool suite comprised of open source and proprietary components that is used by our customers for EFPGA design.

Speaker Change: Their established programs ensure long-term inventory support, often spanning through customer life cycles that can extend decades.

Brian Faith: Their support will give us significant leverage by introducing us to programs that could be beyond our direct reach and pre-qualifying opportunities before we invest resources.

Brian Faith: With new designs ramping, we expect shedments will continue through 2025. Insistant with our prior outlook, we are forecasting a modest increase in display bridge shedments, and we now believe mature product revenue will also be up modestly year over year.

Speaker Change: Their support will give us significant leverage by introducing us to programs that could be beyond our direct reach and pre-qualifying opportunities before we invest resources.

Brian Faith: Aurora is our comprehensive software tool suite comprised of open source and proprietary components that is used by our customers for EFPGA design. It provides seamless integration from customer RTL to EFPGA or FPGA bitstream. With the release of Aurora 2.7 last June, we have continued our cadence of continuous improvements. In the 2.7 update, we further improved user interface and experience and improved timing performance by 20%.

Speaker Change: Aurora is our comprehensive software tool suite comprised of open source and proprietary components that is used by our customers for EFPGA design.

Brian Faith: During July, we announced two new distribution agreements, one with spur microwave to cover markets across India and the second with the stoop electronics, which covers Europe, Israel, Turkey, Australia, and New Zealand. The primary reason for the expansion of our distribution partners is to address the sharp increase in interest we are seeing in international markets. With EFPGA hard IP established for several of the most popular fabrication processes and our sophisticated software tools, we can address this rapidly growing international demand very efficiently through distribution.

Brian Faith: It provides seamless integration from customer RTL to EFPGA or FPGA bits. With the release of Aurora 2.7 last June, we have continued our cadence of continuous improvement. In the 2.7 update, we further improved the user interface and experience and improved timing performance by 20%. Aurora 2.8 is in the works and scheduled for release during Q3, and 2.9 is scheduled for Q4.

Speaker Change: It provides seamless integration from customer RTL to eFPGA or FPGA bitstream.

Speaker Change: With the release of Aurora 2.7 last June, we have continued our cadence of continuous improvements.

Speaker Change: In the 2.7 update, we further improved user interface and experience, and improved timing performance by 20%.

Brian Faith: Aurora 2.8 is in the works and scheduled for release during Q3, and 2.9 is scheduled for Q4. Between these and other improvements, we have scheduled for 2024. We will provide additional improvements in flow automation, increase IP core speed by approximately 50%, and reduce die area for a given size EFPGA core. For our customers, this means easier use, better performance, shorter development cycles, and lower development costs. For quick logic, it means we can address designs that require faster speeds and more cost-sensitive applications.

Speaker Change: Aurora 2.8 is in the works and scheduled for release during Q3 and 2.9 is scheduled for Q4.

Brian Faith: Between these and other improvements we have scheduled for 2024, we will provide additional improvements in flow automation, increase IP core speed by approximately 50%, and reduce die area for a given size EFPGA core. For our customers, this means easier use, better performance, shorter development cycles, and lower development costs. For QuickLogic, it means we can address designs that require faster speeds and more cost-sensitive applications. Turning the Thumbsimall.

Speaker Change: Between these and other improvements we have scheduled for 2024, we will provide additional improvements in flow automation, increase IP core speed by approximately 50%, and reduce die area for a given size EFPGA core.

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

Speaker Change: For QuickLogic, it means we can address designs that require faster speeds and more cost-sensitive applications.

Brian Faith: Communications. Turning to Sentinel.

Brian Faith: Leveraging the four years of experience and success monetizing an open-source business model at QuickLogic, Sensimal announced its own open-source strategy in a press release on May 14. Sensible's Piccolo AI is the first complete open source AutoML solution for the development of Edge AI ML applications. Piccolo AI empowers companies to rapidly develop applications including audio recognition, keyword spotting, predictive maintenance, gesture recognition, and anomaly detection regardless of their On July 25th, Sensible launched a new generative AI feature that enables developers to rapidly build ML training datasets for custom voice recognition, voice command, and speaker identification applications. These models are specifically optimized to run autonomously and efficiently on low-power microcontrollers.

Brian Faith: Leveraging the four years of experience and success monetizing an open source business model at QuickLogic, Sentinel announced his own open source strategy in a press release on May 14th. Sentinel's Peek-A-Low AI is the first complete open source AutoML solution for the development of Edge AI ML applications. Peek-A-Low AI empowers companies to rapidly develop applications including audio recognition, keyword spotting, predictive maintenance, gesture recognition, and anomaly detection, regardless of their expertise in data science.

Speaker Change: Turning to sense of all,

Sensimal: Leveraging the four years of experience and success monetizing an open-source business model at QuickLogic, Sensimal announced its own open-source strategy in a press release on May 14.

Brian Faith: There are established programs that ensure long-term inventory support, often standing through customer life cycles that can extend decades. Their support will give us significant leverage by introducing us to programs that could be beyond our direct reach and pre-qualifying opportunities before we invest resources.

Speaker Change: Sensible's Piccolo AI is the first complete open-source AutoML solution for the development of Edge AI ML applications.

Speaker Change: Piccolo AI empowers companies to rapidly develop applications including audio recognition, keyword spotting, predictive maintenance, gesture recognition, and anomaly detection, regardless of their expertise in data science.

Brian Faith: On July 25th, Sentinel launched a new, generous AI feature that enables developers to rapidly build ML training data sets for custom voice recognition, voice command, and speaker identification applications. These models are specifically optimized to run autonomously and efficiently on low-power microcontrollers.

Speaker Change: On July 25th, Sensible launched a new generative AI feature that enables developers to rapidly build ML training data sets for custom voice recognition, voice command, and speaker identification applications.

Speaker Change: These models are specifically optimized to run autonomously and efficiently on low power microcontrollers.

Brian Faith: Sentinel is collaborating with two top-tier microcontroller companies to enable its AI ML development tools on their edge platforms and planned AI accelerator SoCs. With these significant advances in engagement, Sentinel is already on track to report all-time record revenue in 2024.

Brian Faith: Sentinel is collaborating with two top-tier microcontroller companies to enable AI ML development tools on their edge platforms and planned AI accelerator SOCs. With these significant advances in engagement, Sensible is already on track to report all-time record 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.

Speaker Change: Sentinel is collaborating with two top-tier microcontroller companies to enable AI ML development tools on their edge platforms and planned AI accelerator SOCs.

Brian Faith: Between these and other improvements, we have scheduled for 2024. We will provide additional improvements in flow automation, increase IP core speed by approximately 50% and reduce die area for a given size EFPGA core. For our customers, this means easier use, better performance, shorter development cycles, and lower development costs. For quick logic, it means we can address designs that require faster speeds and more cost-sensitive applications.

Brian Faith: Communications.

Speaker Change: With these significant advances in engagement, Sensible is already on track to report all-time record revenue in 2024.

Elias Nader: With that, let me 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. A second quarter revenue rose 41% from the second quarter of 2023 to 4.1 million dollars, but was down 31% compared to Q1 and was at the lower end of our guidance. The primary reasons for this were the timing of certain contracts and lower connectivity revenue, which is also why new product revenue was below our outlook. New product revenue in Q2 was 3.1 million, up 37% from Q2 last year, but down 37% compared to Q1.

Speaker Change: With that, let me 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.

Elias Nader: Thank you, Brian, and good afternoon, everyone. Our second quarter revenue rose 41% from the second quarter of 2023 to $4.1 million, but it was down 31% compared to Q1 and was at the lower end of our guidance. The primary reasons for this are the timing of certain contracts and lower connectivity revenue, which is also why new product revenue is below our outlook. New product revenue in Q2 was $3.1 million, up 37% from Q2 last year, but down 37% compared to Q1.

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

Elias Nader: Our second quarter revenue rose 41% from the second quarter of 2023 to $4.1 million, but was down 31% compared to Q1 and was at the lower end of our guidance.

Brian Faith: Turning to Sentinel. Leveraging the four years of experience and success monetizing an open source business model at QuickLogic, Sentinel announced his own open source strategy in a press release on May 14th. Sentinel's Peek-A-Low AI is the first complete open source AutoML solution for the development of Edge AI ML applications. Peek-A-Low AI empowers companies to rapidly develop applications including audio recognition, keyword spotting, predictive maintenance, gesture recognition, and anomaly detection, regardless of their expertise in data science.

Elias Nader: The primary reasons for this were the timing of certain contracts and lower connectivity revenue, which is also why new product revenue was below our outlook.

Elias Nader: New product revenue in Q2 was $3.1 million.

Elias Nader: Up 37% from Q2 last year, but down 37% compared to Q1.

Elias Nader: But your product revenue was 1.1 million, up 56% from Q2 last year, and essentially flat with Q1. Non-GABGOS margin in Q2 was 53.1%, compared with 44.2% in Q2 last year, and 70.3% in Q1. And below our outlook for the quarter. The primary reasons are non-GABGOS profit margin was below our outlook, include lower than expected IP revenue, and a higher allocation of what we modeled as early expenses to COGS. Our non-GABGOP operating expenses in Q2 are approximately 2.9 million dollars. This compares with non-GABGOP operating expenses of 2.9 million in the second quarter last year, and 2.5 million dollars in the first quarter.

Elias Nader: The chill product revenue was $1.1 million, up 56% from Q2 last year and essentially flat with Q1. Non-GAAP gross margin in Q2 was 53.1%, compared with 44.2% in Q2 last year and 17.3% in Q1, and Below Our Outlook for the Quarter.

Speaker Change: But your product revenue was $1.1 million.

Speaker Change: up 56% from Q2 last year.

Brian Faith: On July 25th, Sentinel launched a new generous AI feature that enables developers to rapidly build ML training data sets for custom voice recognition, voice command, and speaker identification applications. These models are specifically optimized to run autonomously and efficiently on low-power microcontrollers. Sentinel is collaborating with two top-tier microcontroller companies to enable its AI ML development tools on their Edge platforms and planned AI accelerator SOCs. With these significant advances in engagement, Sentinel is already on track to report all-time record revenue in 2024.

Speaker Change: and essentially flat with Q1.

Speaker Change: Non-GAAP gross margin in Q2 was 53.1%.

Speaker Change: compared with 44.2% in Q2 last year and 17.3% in Q1.

Elias Nader: The primary reasons our non-GAAP gross profit margin was below our outlook include lower-than-expected IP revenue and a higher allocation of what we modeled as R&D expenses to COGS. Our non-GAAP operating expenses in Q2 were approximately $2.9 million. This compares with non-GAAP operating expenses of $2.9 million in the second quarter last year and $2.5 million in the first quarter. Operating expenses were below our outlook because a larger portion of R&D than we expected was attributed to COG.

Speaker Change: and below our outlook for the quarter.

Speaker Change: The primary reasons our non-GAAP gross profit margin was below our outlook

Speaker Change: include lower-than-expected IP revenue

Speaker Change: and a higher allocation of what we modeled as R&D expenses to COGS.

Speaker Change: Our non-GAAP operating expenses in Q2 were approximately $2.9 million.

Elias Nader: With that, let me 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: This compares with non-GAAP operating expenses of $2.9 million in the second quarter last year.

Elias Nader: Operating expenses were below our outlook because a larger portion of R&D because the larger purchase of R.D. that we expected was attributed to COGS. It will be an ongoing challenge to correctly project how much of our R.D. Investments will be allocated to operating expenses and how much will be allocated to COGS. However, at the operating line on an income statement, the tool will balance out. Non-GAAP net loss was 0.7 million or five cents per share. This compares to a non-GAAP net loss of 1.7 million or 12 cents per share in last year's second quarter. A non-gap net income of 1.7 million or 11 cents per due to share in the first quarter of fiscal 2024.

Speaker Change: and $2.5 million in the first quarter.

Elias Nader: Good afternoon, everyone. A second quarter revenue rose 41% from the second quarter of 2023 to 4.1 million dollars, but was down 31% compared to Q1 and was at the lower end of our guidance. The primary reasons for this were the timing of certain contracts and lower connectivity revenue, which is also why new product revenue was below our outlook. New product revenue in Q2 was 3.1 million, up 37% from Q2 last year, but down 37% compared to Q1.

Speaker Change: Operating expenses were below our outlook because a larger portion of R&D

Speaker Change: Because a larger portion of RD that we expected was attributed to COGS.

Elias Nader: It will be an ongoing challenge to correctly project how much of our R&D investments will be allocated to operating expenses and how much will be allocated to COG. However, at the operating line on our income statement, the two will balance out. Our non-GAAP net loss was $0.7 million, or five cents per share.

Speaker Change: It will be an ongoing challenge to correctly project how much of our R&D investments will be allocated to operating expenses and how much will be allocated to COGS.

Speaker Change: However, at the operating line on our income statement, the two will balance out.

Speaker Change: Non-GAAP debt loss was 0.7 million or 5 cents per share.

Elias Nader: This compares to a non-GAAP net loss of $1.7 million, or $0.12 per share, in last year's second quarter, and a non-GAAP net income of $1.7 million, or $0.11 per diluted share, in the first quarter of fiscal 2024. For the second quarter, one customer accounted for 10% or more of our revenue. At the close of Q2, total cash was $23.3 million.

Speaker Change: This compares to a non-gap net loss of 1.7 million.

Speaker Change: $0.12 per share.

Speaker Change: in last year's second quarter, a non-GAAP net income of $4.7 million or $0.11 per diluted share in the first quarter of fiscal 2024.

Elias Nader: For the second quarter, one cost of accounted for 10 percent or more for revenue. At the close of Q2, total cash was 23.3 million compared to 24.6 million at year end 2023 and 27.4 million at the close of Q1. These figures include our 20 million dollar credit facility. The higher the anticipated cash research during Q2 is mostly attributable to the timing for our strategic regulation-hardened contract. In total, our accounts payable were decreased by 3.4 million dollars, which was primarily a large non-recurring payment. Our receivable accounts, which includes contract assets, increased by a net of 537K.

Speaker Change: For the second quarter, one customer accounted for 10% or more of our revenue.

Speaker Change: At the close of Q2, total cash was $23.3 million, compared to $24.6 million at year-end 2023.

Elias Nader: This compares to $24.6 million at year-end 2023 and $27.4 million at the close of Q1. These figures include our $20 million credit facility. The higher than anticipated cash usage during Q2 is mostly attributable to the timing of our strategic radiation-hardened contract. In total, our accounts payable decreased by $3.44 million, which was primarily a large non-recurring payment; receivable accounts, which include contract assets, increased by a net of $537K. Combining this $4 million change in the balances of five counts was the primary reason for the reduction in the cost balance in Q2. Hasha will come in a moment.

Speaker Change: and $27.4 million at the close of Q1.

Speaker Change: These figures include our $20 million credit facility.

Speaker Change: The higher than anticipated cash usage during Q2 is mostly attributable to the timing of our strategic radiation hardened contract.

Speaker Change: In total, our accounts payable decreased by $3.44 million.

Elias Nader: This compares with non-GABGOP operating expenses of 2.9 million in the second quarter last year, and 2.5 million dollars in the first quarter. Operating expenses were below our outlook because a larger portion of R&D because the larger purchase of R.D, that we expected was attributed to COGS. It will be an ongoing challenge to correctly project how much of our R.D, investments will be allocated to operating expenses and how much will be allocated to COGS.

Speaker Change: which was primarily a large non-recurring payment.

Speaker Change: are receivable accounts, which includes contract assets.

Elias Nader: Combined, this 4 million dollar chain in the balances of our accounts was the primary reason for the reduction in the cash balance in Q2. As I will comment on a moment, they may have received an Q3 that we have anticipated in Q2 would benefit a Q3 cash flow.

Speaker Change: increased by a net of 537K.

Speaker Change: Combined, this $4 million change in the balances of 5 counts was the primary reason for the reduction in the cash balance in Q2.

Elias Nader: Payments received in Q3 that we anticipated in Q2 will benefit our Q3 cash flow. Now, moving to our guidance for the third quarter of fiscal 2024, which will end on September 30, 2024. Revenue guidance for Q3 2024 is approximately $4.2 million, plus or minus 10%. Third quarter revenue is expected to be comprised of approximately $3.5 million in new products and $0.7 million in mature products. Lower than anticipated Q3 revenue guidance is attributable to the majority of the second half IP revenue recognition being scheduled now for Q4 and, in some cases, pushed into 2025. With these changes, we have lowered our full-year outlook to 15% growth.

Speaker Change: As I will cover in a moment, payments received in Q3 that we anticipated in Q2 will benefit our Q3 cash flow.

Elias Nader: Now moving to our guidance for the third quarter of fiscal 2024, which will end on September 2020-24. Revenue guidance for Q3 2024 is approximately $4.2 million plus or minus 10 percent. Third quarter revenue is expected to be comprised of approximately 3.5 million in new products and 0.7 million in mature products. Our lower than anticipated Q3 revenue guidance is attributable to the majority of the second half IP revenue recognition being scheduled now for Q4 and, in some cases, pushed into 2025. With these changes, we have lowered our full year outlook to 15 percent growth. I realize this implies very large sequential growth in Q4 2024, but as Brian noted, the majority of the deliverables needed to realize this implied revenue growth are on the books and in process.

Elias Nader: However, at the operating line on an income statement, the tool will balance out. Non-gap net loss was 0.7 million or five cents per share. This compares to a non-gap net loss of 1.7 million or 12 cents per share in last year's second quarter. A non-gap net income of 1.7 million or 11 cents per due to share in the first quarter of fiscal 2024. For the second quarter, one cost of accounted for 10 percent or more for revenue.

Speaker Change: Now moving to our guidance for the third quarter of fiscal 2024 which will end on September 30, 2024.

Speaker Change: Revenue guidance for Q3 2024 is approximately $4.2 million, plus or minus 10%.

Speaker Change: Third quarter revenue is expected to be comprised of approximately $3.5 million in new products.

Speaker Change: and 0.7 million in mature products.

Speaker Change: Our Lord and anticipated Q3 revenue guidance.

Elias Nader: At the close of Q2, total cash was 23.3 million compared to 24.6 million at year end 2023 and 27.4 million at the close of Q1. These figures include our 20 million dollar credit facility. The higher the anticipated cash research during Q2 is mostly attributable to the timing for our strategic regulation-hardened contract. In total, our accounts pay were decreased by 3.4 million dollars which was primarily a large non-recurring payment. Our receivable accounts which includes contract assets increased by a net of 537K.

Speaker Change: is attributable to the majority of the second half IP revenue recognition being scheduled now for Q4 and in some cases pushed into 2025.

Speaker Change: With these changes, we have lowered our full-year outlook to 15% growth.

Elias Nader: I realize this implies very large sequential growth in Q4. 2024. But as Brian noted, the majority of the deliverables needed to realize this implied revenue growth are on the books and in process, based on the anticipated Q3 revenue mix. Non-GAAP gross margin for the third quarter is expected to be approximately 55%, plus or minus five percentage points.

Speaker Change: I realize this implies very large sequential growth in Q4.

Brian Faith: But as Brian noted, the majority of the deliverables needed to realize this implied revenue growth

Elias Nader: Based on the anticipated Q3 revenue mix, non-GAAP growth margin for third quarter is expected to be approximately 55 percent plus or minus 5 percentage points. and non-GAAP operating expenses expected to be approximately $3 million plus or minus 10%. Please note that, given the nature of our industry, we may occasionally need to reclassify certain expenses to COGS, or capitalize certain costs. The reclassifications are primarily related to labor and tooling for revenue contracts with customers. Such capitalization will reduce up-ex and alter the timing for recognizing the corresponding expenses in COGS. This may cause the availability in our gross margins and operating results.

Brian Faith: are on the books and in process.

Speaker Change: based on the anticipated Q3 revenue mix.

Brian Faith: Non-GAAP gross margin for the third quarter is expected to be approximately 55%.

Elias Nader: Our non-GAAP operating expenses are expected to be approximately $3 million, plus or minus 10%. Please note that given the nature of our industry, we may occasionally need to reclassify certain expenses to COGS. I'll capitalize certain costs. The reclassifications are primarily related to labor and tooling for revenue contracts with customers. Such capitalization may reduce OPEC and also Natalia for recognizing the corresponding expenses in COG. This may cause...

Brian Faith: plus or minus five percentage points.

Brian Faith: Non-GAAP operating expenses are expected to be approximately three million dollars.

Elias Nader: Combined this 4 million dollar chain in the balances of our accounts was the primary reason for the reduction in the cash balance in Q2. As I will comment on a moment, they may have received an Q3 that we have anticipated in Q2 would benefit a Q3 cash flow.

Brian Faith: plus or minus 10%.

Brian Faith: Please note that given the nature of our industry, we may occasionally need to reclassify certain expenses to COGS.

Brian Faith: have capitalized certain costs.

Brian Faith: the reclassifications

Elias Nader: Now moving to our guidance for the third quarter of fiscal 2024, which will end on September 2020-24. Revenue guidance for Q3 2024 is approximately 4.2 million plus or minus 10 percent. Third quarter revenue is expected to be comprised of approximately 3.5 million in new products and 0.7 million in mature products.

Brian Faith: are primarily related to labor and tooling for our revenue contracts with customers.

Brian Faith: Such capitalization may reduce OPEX

Nathaniel: and also Nathaniel for recognizing the corresponding expenses in COGS.

Elias Nader: So the inability and our gross margins are not pretty results. Bearing these factors in mind and based on our current full year revenue outlook, 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 a Q3 non-GAAP net loss will be approximately 0.6% to 1.6 million, or 2 cents to 9 cents per share, based on roughly 14.7 million shares.

Nathaniel: This may cause variability in our gross margins and operating results.

Elias Nader: Bearing these factors in mind, and based on our current full-year revenue outlook, we believe our full-year 2020 non-GAAP gross profit margin will be in the upper 60% range. After interest, other income, and taxes, we currently forecast that at Q3, non-GAAP net loss will be approximately $0.6 to $1.6 million or $2.9 per share, based on roughly 14.7 million shares. The difference between our gap and non-GAAP results is related to non-GAAP, stock-based compensation expenses. In Q3, we expect this compensation will be approximately $800,000, similar to Q2. As a reminder, there will be movement in our stock-based compensation in the year, and it may vary each quarter based on the timing of grants and employees.

Nathaniel: bearing these factors in mind and based on our current full year revenue outlook.

Elias Nader: Our lower than anticipated Q3 revenue guidance is attributable to the majority of the second half IP revenue recognition, being scheduled now for Q4 and in some cases pushed into 2025. With these changes, we have lowered our full year outlook to 15 percent growth. I realize this implies very large sequential growth in Q4 2024, but as Brian noted, the majority of the deliverables needed to realize this implied revenue growth are on the books and in process.

Nathaniel: We believe our full year 2024 non-GAAP gross profit margin will be in the upper 60% range.

Nathaniel: After interest, other income, and taxes, we currently forecast that our Q3 non-gap net loss will be approximately 0.6%.

Nathaniel: to $1.6 million or $0.02 to $0.09 per share based on roughly 14.7 million shares.

Elias Nader: The difference between our GAP and non-GAP results is related to non-cash, stock-based compensation expenses. In Q3, we expect this compensation will be approximately $800,000, similar to Q2. As a reminder, there will be movement in our stock-based compensation during the year, and it may vary each quarter based on the timing of grants to employees. The midpoints of our outlook for Q3. We expect cash usage to be approximately zero to $500

Nathaniel: The difference between a GAAP and non-GAAP results is related to non-cash.

Nathaniel: stock-based compensation expenses.

Nathaniel: In Q3, we expect this compensation will be approximately $800,000 similar to Q2.

Elias Nader: Based on the anticipated Q3 revenue mix, non-gap growth margin for third quarter is expected to be approximately 55 percent plus or minus 5 percentage points, and Non-Gap operating expenses expected to be approximately $3 million plus or minus 10%.

Nathaniel: As a reminder, there will be movement in our stock-based compensation during the year, and it may vary each quarter based on the timing of grants to employees.

Elias Nader: At the midpoint of our outlook for Q3, we expect cash resheds to be approximately $0.5 million to $500,000. Please note, we are investing in developing AFPGA, hard IP for certain strategic publication processes in advance of contracts. This includes the development for Intel 18A. We believe this provides us with a strategic advantage in winning contracts, some of which are pending, and will shorten the time it takes us to recognize revenue if contracts for these processes are awarded. Based on our current full-year outlook, we believe we will be cash-flow positive and report double-digit earnings for fiscal 2024.

Nathaniel: At the midpoint of our outlook for Q3, we expect cash usage to be approximately $0 to $500,000.

Elias Nader: Please note, we are investing in developing EFPGA, and hard IP for certain strategic fabrication processes in advance of contract. This includes the development for Intel 18A. We believe this provides us with a strategic advantage in winning contracts, some of which are pending. I will shorten the time it takes us to recognize revenue if contracts for these processes are awarded. Based on our current full-year outlook, we believe we will be cash flow positive and report double-digit earnings for fiscal 2024. Thank you very much.

Elias Nader: Please note that given the nature of our industry, we may occasionally need to reclassify certain expenses to cogs, or capitalize certain costs. The reclassifications are primarily related to labor and tooling for revenue contracts with customers. Such capitalization will reduce up-ex and alter the timing for recognizing the corresponding expenses in cogs. This may cause the availability in our gross margins and operating results. Bearing these factors in mind, and based on our current full-year revenue outlook, we believe our full-year 2020 Non-Gap gross profit margin will be in the upper 60% range.

Nathaniel: Please note, we are investing in developing EFPGA.

Nathaniel: hard IP for certain strategic fabrication processes in advance of contracts.

Nathaniel: This includes the development for Intel 18A.

Nathaniel: We believe this provides us with a strategic advantage in winning contracts, some of which are pending.

Nathaniel: I will shorten the time it takes us to recognize revenue if contracts for these processes are awarded.

Nathaniel: Based on our current full-year outlook, we believe we will be cash flow positive and report double-digit earnings for fiscal 2024.

Brian Faith: Thank you very much.

Brian Faith: With that, I now turn the call back over to Brian for his closing remarks. Thank you, Elias. I would like to take a moment to summarize what we have accomplished so far, where we are today, and where I believe we are going. We were the first, and are still the only, company to integrate open source components into our eFPGA IP and to fully leverage open source technology in our eFPGA user tools. We are also the only eFPGA IP company that has over three decades of experience in delivering discrete FPGAs and integrated devices that include embedded or eFPGAs. These devices continue to win new designs.

Brian Faith: With that, let me now turn the call back over to Brian for exclusive remarks. Thank you, Elias. I would like to take a moment to summarize. We have accomplished so far, where we are today, and where I believe we are going. We were the first and are still the only company to integrate open-source components into our ESPGA IP and to fully leverage open-source technology in our ESPGA user tools. We are also the only ESPGA IP company that has over three decades of experience in delivering discrete FPGAs and integrated devices that include embedded or EFPGA. These devices continue to win new designs.

Nathaniel: Thank you very much. With that, let me now turn the call back over to Brian for exclusive remarks.

Elias Nader: After interest other income and taxes, we currently forecast that at Q3, Non-Gap net loss will be approximately $0.6 to $1.6 million or $2.9 per share, based on roughly $14.7 million shares. The difference between our gap and non-Gap results is related to non-Gap, stock-based compensation expenses. In Q3, we expect this compensation will be approximately $800,000, similar to Q2. As a reminder, there will be movement in our stock-based compensation in the year, and it may vary each quarter based on the timing of grants and employees.

Brian Faith: Thank you Elias. I would like to take a moment to summarize what we have accomplished so far, where we are today, and where I believe we are going.

Brian Faith: We were the first, and are still the only, company to integrate open source components into our eFPGA IP and to fully leverage open source technology in our eFPGA user tools.

Brian Faith: We are also the only EFPGA IP company that has over three decades of experience in delivering discrete FPGAs and integrated devices that include embedded or EFPGA.

Brian Faith: While these merchant-silicon solutions are not the thrust of our business model, our unique experience in managing everything from fabrication to finished goods enables us to leverage existing resources to provide storefront services for our customers. customers. This capability drives more IP business and opens unique opportunities for revenue and profit. The foundation of our business model is the EMPGA IP. We leverage this foundation with software tools to create process-specific and customer-specific EFPGA hard IP much more quickly than our competition. With our proprietary and open-source software tools, we will have process-specific EFPGA hard IP for six different fabrication processes by the end of 2024.

Brian Faith: While these merchant silicon solutions are not the thrust of our business model, our unique experience in managing everything from fabrication to finished goods enables us to leverage existing resources to provide storefront services for our customers. This capability drives more IP business and opens unique opportunities for revenue and profit. The foundation of our business model is the ENPGA IP. We leverage this foundation with software tools to create process-specific and customer-specific eFPGA hard IP much more quickly than our competition.

Brian Faith: These devices continue to win new designs.

Speaker Change: While these merchant silicon solutions are not the thrust of our business model, our unique experiencing in managing everything from fabrication to finished goods enables us to leverage existing resources to provide storefront services for our customers.

Speaker Change: This capability drives more IP business and opens unique opportunities for revenue and profit.

Speaker Change: The foundation of our business model is the EFPGA IP. We leverage this foundation with software tools to create process-specific and customer-specific EFPGA hard IP much more quickly than our competition.

Brian Faith: With our proprietary and open source software tools, we will have process-specific EFPGA hard IP for six different fabrication processes by the end of 2024. In addition to these, we believe we are on schedule to be a leading provider of EFPGA hard IP for Intel 18A. With our proprietary Australis ESPGA IP generator, we can quickly leverage our process-specific hard IP to create customer-specific hard IP.

Speaker Change: With our proprietary and open-source software tools, we will have process-specific EFPGA hard IP for six different fabrication processes by the end of 2024.

Brian Faith: In addition to these, we believe we are on schedule to be a leading provider of EFPGA hard IP for Intel 18A. With our proprietary Australis EFPGA IP generator, we can quickly leverage our process-specific hard IP to create customer-specific hard IP. We are the only EFPGA IP company that leverages this customer-specific hard IP strategy. The Australis also enables us to port our EFPGA hard IP to new process technologies, and about half the time it takes our competition. This IP business model has driven significant growth during the last four years. With proposals now addressing a much wider and more diverse customer base, we expect this growth will accelerate and continue to scale very favorably relative to our operating costs.

Elias Nader: Based on our current full-year outlook, we believe we will be cash-flow-positive and report double-digit earnings for fiscal 2024. Thank you very much.

Speaker Change: In addition to these, we believe we are on schedule to be a leading provider of EFPGA hard IP for Intel 18a.

Speaker Change: With our proprietary Australis ESPGA IP generator, we can quickly leverage our process-specific hard IP to create customer-specific hard IP.

Brian Faith: With that, let me now turn the call back over to Brian for exclusive remarks. Thank you, Elias. I would like to take a moment to summarize.

Brian Faith: We are the only EFPGA IP company that leverages this customer-specific hard IP strategy. The Strelis also enables us to port our EMPGA hard IP to new process technologies in about half the time it takes our competition. This IP business model has driven significant growth during the last four years. With proposals now addressing a much wider and more diverse customer base, we expect this growth will accelerate and continue to scale very favorably relative to our operating costs, in addition to the anticipated growth of our ESPGA IP Foundation.

Brian Faith: We have accomplished so far where we are today and where I believe we are going. We were the first and are still the only company to integrate open-source components into our ESPGA IP and to fully leverage open-source technology in our ESPGA user tools. We are also the only ESPGA IP company that has over three decades of experience in delivering discrete FPGA's and integrated devices that include embedded or EFPGA. These devices continue to win new designs.

Speaker Change: We are the only EFPGA IP company that leverages this customer-specific hard IP strategy.

Speaker Change: Astralis also enables us to port our EMPGA hard IP to new process technologies in about half the time it takes our competition.

Speaker Change: This IP business model has driven significant growth during the last four years.

Speaker Change: With proposals now addressing a much wider and more diverse customer base, we expect this growth will accelerate and continue to scale very favorably relative to our operating costs.

Brian Faith: In addition to the anticipated growth of our EFPGA IP foundation, we believe revenues from storefront and shiplet will begin layering on in late 2025 and accelerate our rate of growth and profitability. In short, the more our foundation of IP customers grows, the more leverage we have above it. All in all, the things that are most important for our long-term success are going extremely well, and even with the lower growth output for 2024, our four-year target is 30%. We believe we are well positioned to maintain or exceed that rate of growth in the coming years.

Brian Faith: We believe revenues from Storefront and Chiplet will begin layering on in late 2025 and accelerate our rate of growth and profitability. In short, the more our foundation of IP customers grows, the more leverage we have above it. All in all, the things that are most important for our long-term success are going extremely well, and even with the lower growth outlook for 2024, our four-year CAGR is 30%.

Speaker Change: In addition to the anticipated growth of our ESPGA IP Foundation.

Speaker Change: We believe revenues from Storefront and Chiplet will begin layering on in late 2025 and accelerate our rate of growth and profitability. In short, the more our foundation of IP customers grows, the more leverage we have above it.

Speaker Change: All in all, the things that are most important for our long-term success are going extremely well. And even with the lower growth outlook for 2024, our four-year CAGR is 30%.

Brian Faith: The foundation of our business model is the EMPGA IP. We leverage this foundation with software tools to create process-specific and customer-specific EFPGA hard IP much more quickly than our competition. With our proprietary and open-source software tools, we will have process-specific EFPGA hard IP for six different fabrication processes by the end of 2024. In addition to these, we believe we are on schedule to be a leading provider of EFPGA hard IP for Intel 18A.

Operator: We believe we are well positioned to maintain or exceed that rate of growth in the coming years. With that, I will turn the call over to questions. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone.

Speaker Change: We believe we are well positioned to maintain or exceed that rate of growth in the coming years.

Operator: With that, I will turn the call over for questions. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If at any time your question has been addressed, and you would like to withdraw your question, please press star and then two. Our first question comes from Rick Nieten with RiverShore Investment Research.

Operator: If you are using a speakerphone, please pick up your handset before pressing the keys. If, at any time, your question has been answered and you would like to withdraw your question, please press star and then 2. Our first question comes from Rick Neaton with Rivershore Investment Research. Please go ahead. Hi Brian. Hello Elias.

Speaker Change: With that, I will turn the call over for questions.

Speaker Change: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time, your question has been addressed,

Brian Faith: With our proprietary Australis EFPGA IP generator, we can quickly leverage our process-specific hard IP to create customer-specific hard IP. We are the only EFPGA IP company that leverages this customer-specific hard IP strategy. The Australis also enables us to port our EFPGA hard IP to new process technologies and about half the time it takes our competition.

Rick Neaton: Hello. So you have about $3 million of revenue being pushed into next year because of push-outs not under your control at certain customers? Is that what you're telling us? That was great.

Speaker Change: and you would like to withdraw your question, please press star and then 2.

Speaker Change: Our first question comes from Rick Neaton with Rivershore Investment Research. Please go ahead

Rick Nieten: Please go ahead.

Brian Faith: Hi, Brian. Hello, Elias. Hello.

Rick Neaton: Hi Brian, hello Elias.

Brian Faith: So you have about $3 million of revenue being pushed into next year because of pushouts not under your control at certain customers. Is that what you are telling us?

Speaker Change: So you have about $3 million of revenue being pushed into next year because of

Brian Faith: This IP business model has driven significant growth during the last four years. With proposals now addressing a much wider and more diverse customer base, we expect this growth will accelerate and continue to scale very favorably relative to our operating costs. In addition to the anticipated growth of our EFPGA IP foundation, we believe revenues from storefront and shiplet will begin layering on in late 2025 and accelerate our rate of growth and profitability. In short, the more our foundation of IP customers grows, the more leverage we have above it.

Speaker Change: push outs not under your control at certain customers? Is that what you're telling us?

Brian Faith: That is correct.

Brian Faith: You called out your situation or your status at the new Intel 18a node that's supposed to enter mass production late next year. Are you going to be the first EFPGA company to offer hard EFPGA IP on that node?

Brian Faith: You called out your situation or your status at the new Intel 18A node that is supposed to enter mass production late next year.

Speaker Change: That is correct.

Speaker Change: You called out your situation or your status at the new Intel 18a node that's supposed to...

Brian Faith: Are you going to be the first ESPGA company to offer hard ESPGA IP on that node? That is our target, and yes, I believe we will need.

Speaker Change: enter mass production late next year.

Speaker Change: Are you going to be the the first EFPGA company to offer hard EFPGA IP on that node?

Brian Faith: All in all the things that are most important for our long-term success are going extremely well, and even with the lower growth output for 2024, our four-year tager is 30%. We believe we are well positioned to maintain or exceed that rate of growth in the coming years.

Brian Faith: That is our target, and yes, I believe we can. In terms of storefront revenue now, You talk about the deals and the sales funnel that have grown to 189 million dollars. What percentage of that or potential storefronts do I don't have that percentage right in front of me, Rick, but I would say that of that total funnel... more than half of that is related to storefront view, not in it. When I say that the member, the way we look at our funnels, a two-year funnel.

Speaker Change: That is our target, and yes, I believe we will be.

Brian Faith: In terms of a storefront revenue now, you talk about the deals and the sales funnel that have grown to $189 million.

Speaker Change: Okay.

Speaker Change: Umm...

Speaker Change: In terms of storefront revenue now,

Brian Faith: With that, I will turn the call over for questions. We will now begin the question and answer session.

Speaker Change: You talk about the deals in the sales funnel that have grown to 189.

Operator: To ask a question, you may press star then one on your touch-tone phone.

Brian Faith: What percentage of that are potential storefront deals?

Speaker Change: million dollars. What percentage of that are potential storefront deals?

Operator: If at any time, your question has been addressed, and you would like to withdraw your question, please press star and then two.

Brian Faith: I don't have that percentage right in front of me, Rick, but I would say that of that total funnel, more than half of that are related to storefront deals.

Speaker Change: I don't have that percentage right in front of me Rick but I would say that of that total funnel

Richard Shannon: Our first question comes from Rick Nieten with RiverShore Investment Research. Please go ahead. Hi, Brian. Hello, Elias. Hello. So you have about $3 million of revenue being pushed into next year because of pushouts not under your control at certain customers. Is that what you are telling us?

Speaker Change: more than half of that

Brian Faith: When I say that, remember, the way we look at our funnel is the two-year funnel. So, the funnel value that we're talking about on these calls would be just representative of the development of those designs. The actual storefront revenue is significantly higher and it falls starting at the end of next year, but really contributing outside of that two-year window.

Speaker Change: are related to storefront deals.

Speaker Change: And when I say that, remember, the way we look at our funnel is a two-year funnel. So the funnel value that we're talking about in these calls would be just representative of the development.

Brian Faith: So the funnel value that we're talking about on these calls would be just representative of the development of those designs; the actual storefront revenue is significantly higher, and it falls sort of starting at the end of next year but really contributes outside of that two-year window. So the final value of the storefront devices themselves outside of TDR would be significantly higher, perhaps even an order of magnitude higher. One other question, you talked about, I think you used the number 40 million in terms of chiplet potential deals. Is that all of that? Is that entire number reflected in the $189 million? No, it's not.

Speaker Change: of those designs, the actual storefront revenue is significantly higher and it falls sort of starting at the end of next year but really contributing outside of that two-year window.

Brian Faith: So, the funnel value of the storefront devices itself outside of that two-year would be significantly higher, perhaps even an order of magnitude higher.

Speaker Change: So, the funnel value of the storefront devices themselves outside that tier would be significantly higher, perhaps even an order of magnitude higher.

Brian Faith: That is correct. You called out your situation or your status at the New Intel 18A node that is supposed to enter mass production late next year. Are you going to be the first ESPGA company to offer hard ESPGA IP on that node?

Brian Faith: One other question: you talked about, I think you used the number 40 million in terms of the chiplet potential deals.

Speaker Change: One other question. You talked about, I think you used the number 40 million in terms of chiplet potential deals. Is that entire number reflected in the 189 million?

Brian Faith: Is that entire number reflected in the $189 million?

Brian Faith: No, it's not.

Brian Faith: And firstly, those are for two specific shipload proposals that we've put forward. Not all of that is in that $189 million funnel because at least one of those is a three-year development project, and so the third year is outside of that $189 million. It's not inside the two-year window yet. And I think, hopefully, that gives you some sense that there is.

Brian Faith: Firstly, those are for two specific chiplet criminal loads that we've put forth. Not all of that is in that $189 million funnel because at least one of those is a three-year development project, and so the third year is outside of that $189. It's not inside the two-year window yet, and I think hopefully that gives you some sense that there's, as we march through time, as things come inside that two-year window, you start to see an acceleration factor of that funnel value going up.

Speaker Change: No, it's not. And those are, firstly, those are for two specific schedule proposals that we've put forth.

Brian Faith: That is our target, and yes, I believe we will need. In terms of a storefront revenue now, you talk about the deals and the sales funnel that have grown to $189 million. What percentage of that are potential storefront deals? I don't have that percentage right in front of me, Rick, but I would say that of that total funnel more than half of that are related to storefront deals.

Speaker Change: Not all of that is in that $189 million funnel because at least one of those is a three-year development project, so the third year is outside of that $189 million. It's not inside the two-year window yet.

Brian Faith: As we march through time, as things come inside that two-year window, you start to see an acceleration factor of that funnel value going up. Can you, one final question on the strategic red hard deal? You've been in a development phase in these first three tranches. Conceptually, how is this deal going to change after the third tranche when you talk about all of the possible future revenues that are possible with if other tranches are awarded to QuickLogic? What is the change in this particular deal in terms of concept? Is it moving, are you talking about something moving into production at that point, or some other type of development? Great question.

Speaker Change: and I think hopefully that gives you some sense that there's as we march through time as things come inside that two-year window you start to see an acceleration factor of that funnel value going up.

Speaker Change: You've been in a development phase in these first three tranches.

Speaker Change: Conceptually, how is this deal going to change after the third tranche when you talk about all of the...

Brian Faith: When I say that, remember, the way we look at our funnel is the two-year funnel. So, the funnel value that we're talking about on these calls would be just representative of the development of those designs, the actual storefront revenue is significantly higher and it falls starting at the end of next year, but really contributing outside of that two-year window. So, the funnel value of the storefront devices itself outside of that two-year would be significantly higher, perhaps even an order of magnitude higher.

Speaker Change: possible future revenues that are possible if

Brian Faith: How does this particular deal change in terms of concept? Is it moving? Are you talking about something moving into production at that point, or some other type of development? Great question. What we've always talked about, and when we talk about the contract, and it's 72 million over four years that they execute other options, that's just for the development of the chip and what I'm allowed to say publicly that content plays having two chips, being taken out of manufacturing and tested, a test chip and a final chip, and that's across that roughly four years and roughly 72 million dollars.

Speaker Change: other tranches are awarded to QuickLogic, how does...

Speaker Change: this particular deal change in terms of concept? Is it moving? Are you talking about something moving into production at that point or some other type of development?

Brian Faith: So what we've always talked about, and when we talk about the contract, and it's $72 million over four years, that's just for the development of the chip. And what I'm allowed to say publicly is that Contemplate is having two chips being taken out, manufactured, and tested. A test chip and a final chip. And that's across that roughly four years and roughly $72 million.

Speaker Change: Great question. So what we've always talked about and when we talk about the contract and it's 72 million over four years that they execute all their options, that's just for the development of the chip. And what I'm allowed to say publicly is that Contemplate's having

Brian Faith: One other question, you talked about, I think you used the number 40 million in terms of the chiplet potential deals. Is that entire number reflected in the $189 million? No, it's not. Firstly, those are for two specific chiplet criminal loads that we've put forth. Not all of that is in that $189 million funnel because at least one of those is a three-year development project, and so the third year is outside of that $189.

Speaker Change: Two chips being taken out manufactured and tested a test chip and a final chip and that's across that roughly four years and roughly 72 million dollars

Brian Faith: Service. After that, our goal is to become the storefront supplier of that resulting device, but final chip to the defense industrial base for strategic and space applications. And none of that storefront device revenue or storefront potential is actually part of the 72 million that we talked about. 72 is just a development contract. I think I shared in several forums that my view of the market potential for that device once is done is probably on the order of several hundred million dollars, if not even more than that. And that's because there are several programs that are public programs, the programs that are going through redesigns and new developments.

Brian Faith: After that, our goal is to become the storefront supplier of that resulting device, that final chip, to the defense industrial base for strategic and space applications. And none of that storefront device revenue or storefront potential is actually part of the $72 million that we talked about. $72 is just the development contract. I think I've shared in several forums that my view of the market potential for that device once it's done is probably on the order of several hundred million dollars, if not even more than that. And that's because there are several for the webcast.

Speaker Change: After that, our goal is to become the storefront supplier of that resulting device, that final chip, to the defense industrial base for strategic and space applications.

Brian Faith: It's not inside the two-year window yet, and I think hopefully that gives you some sense that there's, as we march through time, as things come inside that two-year window, you start to see an acceleration factor of that funnel value going up.

Speaker Change: And none of that storefront device revenue or storefront potential is actually part of the $72 million that we talked about. $72 is just the development contract.

Speaker Change: I think I've shared in several forums that my view of the market potential for that device once it's done is probably on the order of

Brian Faith: Can you, one final question on the strategic grant hard deal? You've been in a development phase in these first three tranches. Conceptually, how is this deal going to change after the third tranche when you talk about all of the possible future revenues that are possible if other tranches are awarded to a quick logic? How does this particular deal change in terms of concept? Is it moving? Are you talking about something moving into production at that point or some other type of development?

Speaker Change: Several hundred million dollars if not even more than that and that's because there are several

Speaker Change: programs that are public programs, the programs that are going through redesigns and new developments at the direction of our government that I think would have very good use for what we're designing with this chip. They're essentially driving the specs for what we're designing.

Brian Faith: That's the direction of government that I think we have very good use for what we're designing with this chip. They're essentially driving the specs for what we're designing. And so that would be this next way of a storefront after the device is designed. And it would be who of us, obviously, if we're engaged with potential end users of this device before that is finished being completed, so that the transition from development to program insertion is smooth and we don't miss a beat in doing so. And I can guarantee you that we are absolutely looking at that so that we can ensure that that happens.

Brian Faith: And so that would be this next wave of stores after the device is designed. And it would behoove us, obviously, if we're engaged with potential end-users of this device before that is finished being completed, so that the transition from development to program insertion is smooth, and we don't miss a beat in doing so. And I can guarantee you that we are absolutely looking into that so that we can ensure that that happens. Okay. Thank you.

Speaker Change: And so that would be this next wave of storefront software-to-devices design.

Speaker Change: and it would behoove us obviously if we're engaged with potential end users of this device before that is finished being completed so that the transition from development to program insertion is smooth and we don't miss a beat in doing so.

Brian Faith: Great question. What we've always talked about, and when we talk about the contract, and it's 72 million over four years that they execute other options, that's just for the development of the chip and what I'm allowed to say publicly that content plays having two chips, being taken out of manufacturing and tested, a test chip and a final chip, and that's across that roughly four years and roughly 72 million dollars. Service. After that, our goal is to become the storefront supplier of that resulting device, but final chip to the defense industrial base for strategic and space applications.

Speaker Change: And I can guarantee you that we are absolutely looking at that so that we can ensure that that happens.

Brian Faith: Okay. And the original four-year time frame for that program, you're about halfway through it now. And so if this goes as expected, you're expecting revenues to accelerate in 25 and 26 from this program significantly above what they have done. Is that a correct assumption? Yeah, it is. And I think that follows what was normally happening in an HIP design cycle. You have your initial design work. When you start manufacturing things, that's when the cost starts increasing. And we haven't talked about taking out a test ship yet for this program. So you can imagine, when that starts happening, we start doing some really detailed testing and cycles of learning on that shift from the final shift that the costs will increase, and therefore the revenue will also increase.

Brian Faith: And the original four-year timeframe for that program, you're about halfway through it now. And so if this goes as expected, you're expecting revenues to accelerate in 25 and 26 from this program, significantly above what they have. Is that a correct assumption? Yeah, it is.

Speaker Change: Okay, and the original four-year time frame for that program, you're about halfway through it now.

Speaker Change: and so if this goes as expected you're expecting revenues to accelerate in 25 and 26 from this program significantly above what they have been. Is that a correct assumption?

Brian Faith: And I think that follows what would normally happen in any chip design cycle. You have your initial design work. When you start manufacturing things, that's when the cost starts increasing. And we haven't talked about tapping out a test chip yet for this program.

Brian Faith: And none of that storefront device revenue or storefront potential is actually part of the 72 million that we talked about. 72 is just a development contract. I think I shared in several forums that my view of the market potential for that device once is done is probably on the order of several hundred million dollars if not even more than that. And that's because there are several programs that are public programs, the programs that are going through redesigns and new developments.

Speaker Change: Yeah, it is and I think that follows what would normally happen in any chip design cycle

Speaker Change: You have your initial design work. When you start manufacturing things, that's when the cost starts increasing.

Speaker Change: and we haven't talked about taping out a test chip yet for this program.

Brian Faith: So you can imagine when that starts happening, and we start doing some really detailed testing and cycles of learning on that chip for the final chip, that the costs will increase, and therefore the revenue will also increase. So yes, it is a fair assumption that that will happen. Thanks, Brian. Thanks for providing that information, and I'll step out of view right now. Thanks, Rick.

Speaker Change: So you can imagine when that starts happening, we start doing some really detailed testing and cycles of learning on that chip for the final chip that the costs will increase and therefore the revenue will also increase. So yes, it is a fair assumption that that will happen.

Brian Faith: So yes, it is a fair assumption that that will happen.

Rick Nieten: Okay. Thanks, Brian. Thanks for providing that information.

Speaker Change: Okay.

Speaker Change: Thanks, Brian. Thanks for providing that information, and I'll step out of the queue right now.

Rick Nieten: And I'll step on it directly right now.

Brian Faith: That's the direction of government that I think we have very good use for what we're designing with this chip. They're essentially driving the specs for what we're designing. And so that would be this next way of a storefront after the device is designed. And it would be who of us obviously, if we're engaged with potential end users of this device before that is finished being completed, so that the transition from development to program insertion is smooth and we don't miss a beat in doing so. And I can guarantee you that we are absolutely looking at that so that we can ensure that that happens.

Richard Shannon: Thank you. And the next question comes from Richard Shannon with Craig Hallum. Please go ahead. Well, hi, Brian. Why is how you guys doing? We love it. We love Richard. Not too bad. Thanks.

Operator: Thank you. And the next question comes from Richard Shannon with Craig Hallam. Please go ahead.

Brian Faith: Thank you.

Speaker Change: And the next question comes from Richard Shannon with Craig Hallam. Please go ahead.

Richard Shannon: Well, hi Brian and Elias, how are you guys doing? Good luck, Richard. Good luck, Richard. Not too bad, not too bad, thanks.

Richard Shannon: Hi Brian, Elias, how are you guys doing?

Speaker Change: Good luck, Richard. Good luck, Richard.

Brian Faith: I'm going to fall upon the first question here, just talking about the pushouts for the year. A lot of detail in your prepared remarks, Brian. I probably missed some things here, but I think you mentioned in response to the last question here, largely from IP deals and I think connectivity. And did I catch it correctly that there's largely two IP deals that were part of that? And then, in the connectivity space, what exactly does that mean? Is that revenue as you expect to improve, or is to say, you know, a lower level of revenue is expected.

Brian Faith: I'm going to follow up on the first question here, just talking about the pushouts for the year. A lot of detail in your prepared remarks, Brian, I probably missed some things here, but I think you mentioned in response to the last question here, largely from IP deals and, I think, connectivity, and did I catch it correctly that there were largely two IP deals that were part of that? And then, in the connectivity space, what exactly does that mean? Is that the revenue you expect to improve, or is this a lower level of revenues you expect to grow? So let me address the connectivity issue first.

Richard Shannon: Not too bad, not too bad, thanks.

Richard Shannon: I'm going to follow up on the first question here, just talking about the pushouts for the year. A lot of detail in your prepared remarks, Brian. I probably missed some things here, but I think you mentioned in response to the last question here, largely from IP deals and I think connectivity. And did I catch it correctly that there's largely two IP deals that were

Speaker Change: Part of that, and then in the connectivity space, what exactly does that mean? Is that revenues you expect to improve, or is this a lower level of revenues expected going forward?

Brian Faith: and going forward.

Brian Faith: So let me address the kind I can do in first the connectivity or essentially some of the FPGA technologies that we've been selling for some time, their devices, the primary markets that we still have to our industrial and aerospace and defense, and there were definitely some push outs from Q2 from our forecast that we used on the last call for guidance for Q2 to what actually transpired with some of those customers. Looking further, funding vehicles, especially on the defense side, to make those orders happen and take product this year. So we've moved some of that out to the second half based on that feedback, but that was definitely a downside hit to the Q2 revenue number for the IP deals.

Brian Faith: The connectivity is essentially some of the FPGA technologies that we've been selling for some time, their devices. The primary markets that we sell it to are industrial and aerospace and defense, and there were definitely some pushouts from Q2 from our forecast that we used on the last call for guidance for Q2 to what actually transpired with some of those customers looking for other funding vehicles, especially on the defense side, to make those orders happen and take product this year.

Speaker Change: [inaudible]

Speaker Change: So let me address the connectivity one first. The connectivity are essentially some of the FPGA technologies that we've been selling for some time. They're devices.

Speaker Change: The primary markets that we sell it to are industrial and aerospace and defense.

Speaker Change: and there were definitely some push-outs.

Speaker Change: from Q2 from our forecast that we used on the last call for guidance for Q2 to what actually transpired with some of those customers.

Brian Faith: And we haven't talked about taking out a test ship yet for this program. So you can imagine, when that starts happening, we start doing some really detailed testing and cycles of learning on that shift from the final shift that the costs will increase and therefore the revenue will also increase. So yes, it is a fair assumption that that will happen.

Speaker Change: looking for other funding vehicles, especially on the defense side, to make those orders happen and take product this year. So, we've moved some of that out to the second half based on that feedback, but that was definitely a downside hit to the Q2 revenue number.

Brian Faith: So we've moved some of that out to the second half based on that feedback, but that was definitely a downside hit to the Q2 revenue number for the IP deals. There were a smattering of smaller deals, as I mentioned in the prepared remarks, that were the reasons for the lower revenue, some of which we think are going to push into 2025 now. The biggest one that was something we already talked about previously was the 2022 November takeout customer and them pushing some of the needs of what they need from us into 2025 because of a subcontractor to them and some delays that that subcontractor is having that sort of flow down and impact everything from the programmatic perspective, which ultimately means the revenue that we had assumed in the 2024 second half will be pushing out to 2025 for that specific project. Okay, that's And just to follow up on this, sounds like the November 2022 customer is unique in some manner from the other deals. Is there a consistency or consistent reason for these?

Brian Faith: There were a smattering of smaller deals, as I mentioned in the prepared remarks, that were the reasons for the lower revenue. Some of which we think are going to push into 2025 now. The biggest one that was something we already talked about previously was the 2022 November takeout customer, and then pushing some of the needs of what they need from us into 2025 because of a subcontractor to them. Some delays with that subcontractors having that sort of float down and impact everything from the programmatic perspective, which ultimately means the revenue of the weight is in 2024 second half.

Speaker Change: for the IP deals.

Speaker Change: There were a smattering of smaller deals as I mentioned in the prepared remarks.

Richard Shannon: Okay. Thanks, Brian. Thanks for providing that information.

Speaker Change: that were the reasons for the lower revenue, some of which we think are going to push into 2025 now.

Operator: And I'll step on it directly right now. Thank you.

Richard Shannon: And the next question comes from Richard Shannon with Craig Hallum. Please go ahead. Well, hi, Brian. Why is how you guys doing? We love it. We love Richard. Not too bad. Thanks.

Speaker Change: The biggest one that was something we'd already talked about previously was the 2022 November takeout customer.

Richard Shannon: I'm going to fall upon the first question here, just talking about the pushouts for the year. A lot of detail in your prepared remarks, Brian. I probably missed some things here, but I think you mentioned in response to the last question here, largely from IP deals and I think connectivity. And did I catch it correctly that there's largely two IP deals that were part of that? And then in the connectivity space, what exactly does that mean? Is that revenue as you expect to improve or is to say, you know, a lower level of revenue is expected, and going forward.

Speaker Change: and then pushing some of the needs of what they need from us.

Speaker Change: into 2025 because of a subcontractor to them and some delays that that subcontractor is having that

Speaker Change: sort of slow down and impact everything from the programmatic perspective, which ultimately means the revenue that we had assumed in 2024 second half will be pushing out to 2025 for that specific project.

Brian Faith: We'll be pushing out to 2025, but that specific project. Okay, that's helpful.

Brian Faith: Just to follow up on this, sounds like the November 2022 customer is unique in some manner; the other deals. Is there a consistency or consistent reason for these? So they kind of program specific. In some cases, they a lot of it. They have the vocals from us. They just need to lock up the funding that they need in place in order to move forward. Because obviously, RIP is not something on the order of a USB quarter. It's quite a bit more valuable than that. In other cases, they're just shifting of project schedules for resource reasons into 2025.

Speaker Change: [inaudible]

Speaker Change: Okay, that's helpful. Just to follow up on this, it sounds like the November 2022 customer is unique in some manner to the other deals. Is there a consistency or consistent reason for these or are they kind of program specific?

Brian Faith: So let me address the kind I can do in first the connectivity or essentially some of the FPGA technologies that we've been selling for some time, their devices, the primary markets that we still have to our industrial and aerospace and defense, and there were definitely some push outs from Q2 from our forecast that we used on the last call for guidance for Q2 to what actually transpired with some of those customers. Looking further, funding vehicles, especially on the defense side to make those orders happen and take product this year.

Brian Faith: Are they kind of programs? In some cases, they love it, they have proposals from us, and they just need to lock up the funding that they need in place in order to move forward, because obviously RIP is not something on the order of a USB cord; it's quite a bit more valuable than that. In other cases, they're just shifting project schedules for resource reasons into 2025. And if they're shifting program needs, then they're not going to need the IP this year. That'll get pushed out to next year.

Speaker Change: In some cases, they love it, they have proposals from us, they just need to lock up the funding that they need in place in order to move forward.

Speaker Change: because obviously RIP is not something on the order of a USB cord. It's quite a bit more valuable than that. In other cases, they're just shifting of project schedules for resource reasons into 2025.

Brian Faith: And if they're shifting programming needs and they're not going to need VIP this year, that'll get pushed out to next year. So largely falls into those two buckets.

Speaker Change: And if they're shifting program needs, then they're not going to need the IP this year. That'll get pushed out to next year. So it largely falls into those two buckets.

Brian Faith: So it largely falls into those two buckets. And as far as the market sector goes, if you're interested in that, primarily Aerospace and Defense, and some industrial, as far as the markets go, basically comprise most of those opportunities. I'm probably not going to specify too much, but it would be safe to say that kind of an equal contribution in terms of the difference in the guidance here is 30% to 15%. Is it roughly half and half in dollar terms there? Leaning one way or the other? It's probably close enough to half past, but let's go with it.

Brian Faith: And as far as market sector goes, if you're interested in that, it's primarily aerospace and defense and some industrial as far as the markets go that basically comprise most of those opportunities.

Speaker Change: And as far as market sector goes, if you're interested in that, it's primarily

Speaker Change: aerospace and defense and some industrial as far as the markets go that basically comprise most of those opportunities.

Brian Faith: Okay, I'm probably probably not going to specify too much, but it would be safe to say they kind of an equal contribution in terms of the difference in the guidance here for 30% to 15% is roughly half and half in dollar terms or leaning one way or the other. It's probably close enough to have that. Let's go with that.

Speaker Change: Okay I'm probably probably not going to specify too much but it'd be safe to say they kind of an equal contribution in terms of the difference in the guidance here is 30% to 15 is it roughly half and half in dollar terms there or leaning one way or the other.

Brian Faith: Okay, fair enough then. Let's see here. I guess maybe looking farther out here, maybe interesting comment a couple times here about acceleration as we get into latter half of kind of late next year related chiplets and storefront. Maybe if you can, maybe provide a little bit more detail here and how many opportunities are contributing to this sort of impact. I'd say about 25% of our IP-based opportunities now are coming in and actually asking us to quote, not just the IP, but the development of the device and because of our intimate knowledge and how you manufacture and test FPGA devices, also the storefront responsibility.

Speaker Change: It's probably close enough to half half, so let's go with that.

Brian Faith: Okay, fair enough. Let's see here. I guess maybe looking farther out here. I made an interesting comment a couple times here about acceleration as we get into the latter half of or kind of late next year related to chiplets and storefront. Maybe you can maybe provide a little bit more detail here and how many opportunities are contributing to this sort of inflection. You know, I'd say about 25% of our IP-based opportunities now are coming in and actually asking us to quote not just the IP but the development of the device and, because of our intimate knowledge of high-end manufacturing tests, FPGA devices, also the storefront responsibility.

Speaker Change: Okay, fair enough then.

Brian Faith: Some delays with that subcontractors having that sort of float down and impact everything from the programmatic perspective, which ultimately means the revenue of the weight is in 2024 second half. We'll be pushing out to 2025, but that specific project.

Speaker Change: Let's see here.

Speaker Change: I guess maybe looking farther out here made an interesting comment a couple times here about acceleration as we get into the latter half of or kind of late next year related to chiplets and storefront. Maybe if you can maybe provide a little bit more detail here and how many opportunities are contributing to this sort of inflection.

Brian Faith: Okay, that's helpful. Just to follow up on this sounds like the November 2022 customer is unique in some manner, the other deals. Is there a consistency or consistent reason for these? So they kind of program specific. In some cases, they a lot of it. They have the vocals from us. They just need to lock up the funding that they need in place in order to move forward. Because obviously RIP is not something on the order of a usb quarter.

Speaker Change: You know, I'd say about 25% of our IP-based opportunities now are coming in and actually asking us to quote not just the IP, but...

Speaker Change: the development of the device and because of our intimate knowledge in high-end manufacturing tests, FPGA devices are also the storefront responsibility.

Brian Faith: You probably heard in my prepared remarks my mentioning of just in the last month alone $8 million in deals coming in; some of those are the development of what I'll call custom FPGAs, not just IP, and also the storefront responsibility for that. And again, that $8 million number I used, that's just the development, again, that's not the actual storefront revenue. But we're seeing a really increased pace in how people are looking at doing these things. Maybe not just because they don't want to do the whole SOC design if it's primarily FPGA, but you can find it too.

Brian Faith: Do you probably heard in my prepared remarks my mentioning have just in the last month alone $8 million in deals coming in. Some of those are development of what I'll call custom FPGA, not just IP, and also the storefront responsibility for that. And again, that $8 million number I use, that's just the development again. That's not the actual storefront revenue. But we're seeing a really increased clip in how people are looking at doing these things. Maybe not just they don't want to do the whole SLC design. If it's primarily FPGA, you know, work with a company that knows how to do that and do the device development around the storefront.

Brian Faith: It's quite a bit more valuable than that. In other cases, they're just shifting of project schedules for resource reasons into 2025. And if they're shifting programming needs and they're not going to need VIP this year, that'll get pushed out to next year. So largely falls into those two buckets.

Speaker Change: You probably heard in my prepared remarks my mentioning of just in the last month alone

Speaker Change: $8 million in deals coming in some of those are development of

Speaker Change: that I'll call custom FPGAs, not just IP, and also the storefront responsibility for that. And again, that $8 million number I used, that's just the development again. That's not the actual storefront revenue.

Richard Shannon: And as far as market sector goes, if you're interested in that, it's primarily aerospace and defense and some industrial as far as the markets go that basically comprise most of those opportunities. Okay, I'm probably probably not going to specify too much, but it would be safe to say they kind of an equal contribution in terms of the difference in the guidance here for 30% to 15% is roughly half and half in dollar terms or leaning one way or the other. It's probably close enough to have that let's go with that. Okay, fair enough then. Let's see here.

Speaker Change: But we're seeing a really increased clip in how people are looking at doing these things. Maybe not just, they don't want to do the whole SOC design if it's primarily FPGA.

Brian Faith: So we've definitely seen an increase in the percentage of designs that are coming through that are more storefront oriented. And the great thing about our development and our business model A, from a business perspective, we can handle that because we have an operations team and supply chain management. And indeed, the whole notion of Australia is that we can do customer-specific iterations of our IP. And so we're seeing a lot of interest now coming in for that, which I also think is related to the fact that the more IP process, the more IPs we have on different process technologies, the sort of accelerating factor you have because now you already have IP ready on this process note.

Speaker Change: work with a company that knows how to do that and do the device development and run the storefront. So, we've definitely seen an increase.

Speaker Change: and the percentage of designs that are coming through that are more storefront oriented. And the great thing about our development and our business model is, A, from a business perspective, we can handle that because we have an operations team and supply chain management, and B,

Brian Faith: The whole notion of Astralis is that we can do customer-specific iterations of our IP, and so we're seeing a lot of interest now coming in for that, which I also think is related to the fact that the more IP processes we have, the more patents we have on different process technologies, on the web. We have good coverage of that, so we can respond really quickly and, I think, with good value in providing input for that sort of full turnkey device and storefront as well.

Speaker Change: The whole notion of Astralis is that we can do customer specific iterations of our IP and So we're seeing a lot of interest now coming in for that Which I also think is related to the fact that the more IP process the more IPs we have on different process technologies

Brian Faith: I guess maybe looking farther out here, maybe interesting comment a couple times here about acceleration as we get into latter half of kind of late next year related chiplets and storefront. Maybe if you can, maybe provide a little bit more detail here and how many opportunities are contributing to this sort of impact. I'd say about 25% of our IP-based opportunities now are coming in and actually asking us to quote, not just the IP, but the development of the device and because of our intimate knowledge and how you manufacture and test FPGA devices, also the storefront responsibility.

Speaker Change: the sort of accelerating factor you have because now you already have IP ready on those process nodes. So when customers come in and they wanna do a chip at 22 FDX or 12 OP or TSMC 12 or whatever it may be,

Brian Faith: So when customers come in and they want to do a chip at 22FDX or 12LP or TSMC12 or whatever it may be, we have good coverage of that. So we can respond really quickly. And I think we're good value in providing a hope for that sort of folder and key device and storefront as well. Okay.

Speaker Change: We have good coverage of that so we can respond really quickly And I think with good value in providing a vote for that sort of full turnkey device and storefront as well

Brian Faith: Okay. Very interesting comments there, Brian. I'll look at those a little later and probably get back to you on that. There is some good stuff there. My last question, your kind of big picture. One of the questions I get somewhat consistently from investors is, they always like to see announcements of deals here. You had a couple of nice ones in the first quarter this year, and others, other than the strategic red heart, I'm not sure there were a lot last quarter.

Brian Faith: Very interesting comments there, Brian. I'll look at those a little later and probably get back to you on that. Some good stuff there.

Speaker Change: Okay, very interesting comments there, Brian.

Brian Faith: My last question, you're kind of a big picture. One of the questions I get somewhat consistently from investors is, I always like to see announcements of deals here. We had a couple of nice ones in the first quarter this year. Other than the strategic grad hard, I'm not sure there's a lot last quarter. So maybe if you can help people have a perspective here of how many proposals you've got in the funnel and how do we think about how many to get across the finish line and even think about a win rate here to think about the number of contracts you might be able to announce in the second half of the year.

Brian Faith: Do you probably heard in my prepared remarks my mentioning have just in the last month alone $8 million in deals coming in. Some of those are development of what I'll call custom FPGA, not just IP and also the storefront responsibility for that. And again, that $8 million number I use, that's just the development again. That's not the actual storefront revenue. But we're seeing a really increased clip in how people are looking at doing these things.

Speaker Change: look at those a little later and probably get back to you on that. Some good stuff there. My last question, your kind of big picture, one of the questions I get somewhat consistently from investors is

Speaker Change: I always like to see announcements of deals here, you had a couple nice ones in the first quarter this year. Other than the Strategic Red Heart, I'm not sure there was a lot last quarter.

Brian Faith: So maybe you can help people have a perspective here of how many proposals you've got in the funnel, and how we think about how many they get across the finish line, and even think about a win rate here to think about the number of contracts you might be able to announce. Again, I'll answer the last one first.

Speaker Change: So maybe if you can help people have a perspective here of how many proposals you've got in the funnel and how do we think about how many they get across the finish line and even thinking about a win rate here to think about the number of contracts you might be able to announce in the second half.

Brian Faith: Maybe not just they don't want to do the whole SLC design. If it's primarily FPGA, you know, work with a company that knows how to do that and do the device development around the storefront. So we've definitely seen an increase in the percentage of designs that are coming through that are more storefront oriented. And the great thing about our development and our business model A, from a business perspective, we can handle that because we have an operations team and supply chain management.

Brian Faith: Again, I'll answer the last one first there, that I noted the exact number in front of me on the win rate, that I can tell you with certainty that the win rate is increasing. As we're finding how we present our IP to my earlier point, the more time, the more process technologies we already have support for, it speeds up and lowers the cost of development of IP that it becomes customer specific off those existing nodes. And so, as a result of that, the hit rate also is increasing. And I think we're getting smarter about how we target and pick the customers.

Speaker Change: here.

Brian Faith: I don't have the exact number in front of me on the win rate, but I can tell you with certainty that the win rate is increasing as we're refining how we present our IP. To my earlier point, the more process technologies we already have support for, it speeds up and lowers the cost of developing IP so that it becomes customer-specific off those existing nodes. And so, as a result of that, the hit rate is also increasing.

Speaker Change: Again, I'll answer the last one first there.

Speaker Change: I noted the exact number in front of me on the win rate, but I can tell you with certainty that the win rate is increasing.

Speaker Change: as we're refining how we present our IP. To my earlier point, the more process technologies we already have support for, it speeds up and lowers the cost of development of IP that it becomes customer-specific off those existing nodes.

Brian Faith: And indeed, the whole notion of Australia is that we can do customer specific iterations of our IP. And so we're seeing a lot of interest now coming in for that, which I also think is related to the fact that the more IP process, the more IPs we have on different process technologies, the sort of accelerating factor you have because now you already have IP ready on this process note. So when customers come in and they want to do a chip at 22FDX or 12LP or TSMC12 or whatever it may be, we have good coverage of that. So we can respond really quickly. And I think we're good value in providing a hope for that sort of folder and key device and storefront as well.

Brian Faith: And I think we're getting smarter about how we target and pick the customers to do deep dives with this custom EFPGA approach. We're getting, I think, much better at doing that. And, in addition to that, just in general, if you rewind now to the beginning of the year, we had talked about, yeah, we'd like to have, you know, 10 IP contracts won this year. We can do 10.

Speaker Change: And so, as a result of that, the hit rate also is increasing. And I think we're getting smarter about how we target and pick the customers to do deep dives with on this custom EFPGA approach. We're getting, I think, much better at doing that.

Brian Faith: So you need types of it on this custom EFPGA approach. We're getting, I think, much better at that. I think in addition to that, just in general, if you rewind now to the beginning of the year, we have talked about, yeah, we'd like to have, you know, 10 IP contracts won this year. We can do 10. We're going to be in a good spot to hitting our revenue goals, and you're rising to the beginning, you know, rapid fire rate at the beginning. We got the search for the government contract, but we're still in the process of closing the ones that would get us much closer to that 10 goal for the year.

Speaker Change: I think in addition to that, just in general, if you rewind now to the beginning of the year, we had talked about, yeah, we'd like to have, you know, 10 IP contracts won this year. We can do 10. We're going to be in a good spot to hitting our revenue goals.

Brian Faith: We're going to be in a good spot to hit our revenue goals. And you're right, at the beginning of the year, you know, rapid fire right at the beginning, we got this third tranche of the government contract, but we're still in the process of closing the ones that would get us much closer to that 10% goal for the year. So I would say just to people listening to the call, reading the transcript, still keep your eye on these upcoming wins that we hope they're going to be locking in and announcing so that you get some sense that we are increasing the hit rate, especially for ones of notable magnitude in terms of dollars.

Speaker Change: And you're right, in the beginning year, you know, rapid fire right in the beginning, we got this third tranche of the government contract, but we were still in the process of closing the ones that would get us much closer to that ten goal for the year.

Richard Shannon: Okay. Very interesting comments there, Brian. I'll look at those a little later and probably get back to you on that. Some good stuff there.

Brian Faith: So I would say just from people listening to the call of read in the transcript, still keep dry on these upcoming wins that we hope they're going to be locking in and announcing those so that you get some sense that we are increasing the hit rate, especially for ones of notable magnitudes in terms of dollars. And again, I'll remind everybody, this is also why we're investing in doing our EFPJ at Foundry's like Intel for ETA, because we want to be ready to respond really quickly when somebody comes in with an IP request that we've already got that fundamental work down on that Foundry and that process note, so we can quickly move to customer specific and IP delivery in order for revenue recognition.

Richard Shannon: My last question, you're kind of a big picture. One of the questions I get somewhat consistently from investors is I always like to see announcements of deals here. We had a couple of nice ones in the first quarter this year. Other than the strategic grad hard, I'm not sure there's a lot last quarter.

Speaker Change: So I would say just from people listening to the call, reading the transcript, still keep your eye on these upcoming wins that we hope they're going to be locking in and announcing those so that you get some sense that we are increasing the hit rate, especially for ones of notable magnitude in terms of dollars.

Brian Faith: And again, I'll remind everybody, this is also why we're investing in doing our EFPGA at foundries like Intel for 18A, because we want to be ready to respond really quickly when somebody comes in with an IP request because we've already got that fundamental work done on that foundry and that process node so we can quickly move to customer-specific IP delivery and, therefore, revenue recognition. So, I think we've got a lot of things lined up for the deliverables with that, waiting on a couple of contracts to win that we can then announce so everybody can see that, and tying up, being able to deliver those by the end of the year for that strong Q4 that we are predicting.

Brian Faith: So maybe if you can help people have a perspective here of how many proposals you've got in the funnel and how do we think about how many to get across the finish line and even think about a win rate here to think about the number of contracts you might be able to announce in the second half of the year. Again, I'll answer the last one first there that I noted the exact number in front of me on the win rate that I can tell you with certainty that the win rate is increasing.

Speaker Change: And again I'll remind everybody

Speaker Change: This is also why we're investing in doing our EFPGA at foundries like Intel for 18A.

Speaker Change: because we want to be ready to respond really quickly when somebody comes in with an IP request that we've already got that fundamental work done on that foundry and that process node so we can quickly move to customer-specific and IP delivery and therefore revenue recognition.

Brian Faith: So I think we've got a lot of things lined up for the deliverables with that, laying on a couple of contracts to win, that we can then announce so everybody can see that, teeing up, being able to deliver those by the end of the year for that strong Q4 that we are predicting. So I'll still say, going back to your first question, which are there; the goal is still 10 for the year. Obviously, we're not there yet, but I think we have enough of these in the funnel that should have some decision points between now and early fall that we'll be able to close the gap that we have today to that 10.

Brian Faith: As we're finding how we present our IP to my earlier point, the more time, the more process technologies we already have support for, it speeds up and lowers the cost of development of IP that it becomes customer specific off those existing nodes. And so as a result of that, the hit rate also is increasing. And I think we're getting smarter about how we target and pick the customers. So you need types of it on this custom EFPGA approach.

Speaker Change: So, I think we've got a lot of things lined up for the deliverables with that. Waiting on a couple of contracts to win that we can then announce so everybody can see that. Teeing up, being able to deliver those by the end of the year for that strong Q4 that we are predicting. So, I'll still say, going back to your first question, Richard, there.

Brian Faith: So, I'll still say, going back to your first question, Richard, there, the goal is still 10 for the year. Obviously, we're not there yet, but I think we have enough of these in the funnel that should have some decision points between now and early fall that we'll be able to close the gap that we have today to that 10. And part of that is just, you know, companies that are taking vacations right now, coming back from those vacations and making these big decisions. Part of that is the fact that I think some of these are government-funded proposals, and everybody knows the government fiscal year ends September 30th and then sort of opens up new rounds of funding for projects that are starting in the first week of April, or it's not April, excuse me, October.

Speaker Change: The goal is still ten for the year. Obviously we're not there yet, but I think we have enough of these in the funnel that should have some decision points between now and early fall that we'll be able to close the gap that we have today to that ten. And part of that is just, you know,

Brian Faith: We're getting, I think, much better at that. I think in addition to that, just in general, if you rewind now to the beginning of the year, we have talked about, yeah, we'd like to have, you know, 10 IP contracts won this year. We can do 10. We're going to be in a good spot to hitting our revenue goals, and you're rising to the beginning, you know, rapid fire rate at the beginning.

Brian Faith: And part of that is just companies that are taking vacations right now are coming back from the vacations and making these big decisions. Part of that is the fact that I think some of these are government-funded proposals, and everybody knows the government fiscal year ends September 30th, and then sort of opens up new rounds of funding for projects that are starting in the first week of October. So that should probably be another time frame that's sort of going to loosen up the rain since some of these proposals, and therefore the funding for them accordingly. Do that help?

Speaker Change: companies that are taking vacations right now, coming back from those vacations and making these big decisions. Part of that is the fact that I think some of these are government-funded proposals and everybody knows the government fiscal year ends September 30th and then

Speaker Change: sort of opens up new rounds of funding for projects that are starting in the first week of April, or it's not April, it's in October. So that should probably be another time frame that's sort of going to loosen up the reins on some of these proposals and therefore the funding for them accordingly.

Brian Faith: We got the search for the government contract, but we're still in the process of closing the ones that would get us much closer to that 10 goal for the year. So I would say just from people listening to the call of read in the transcript, still keep dry on these upcoming wins that we hope they're going to be locking in and announcing those so that you get some sense that we are increasing the hit rate, especially for ones of notable magnitudes in terms of dollars.

Brian Faith: And so that should probably be another timeframe that's sort of going to loosen up the reins on some of these proposals and, therefore, the funding for them accordingly. Does that help? That is very, very fulsome commentary, Brian. I will jump out of line.

Brian Faith: That does. It's a very, very full-sum commentary, Brian.

Speaker Change: Did that help?

Brian Faith: I will jump out of line. Thanks, like us. Great.

Speaker Change: That does. Very, very fulsome commentary, Brian. I will jump out of line. Thanks a lot, guys.

Operator: Great, thanks for your time, Richard. And the next question comes from Morton Yang on Oppenheimer. Please go ahead.

Martin Yang: Thanks for your time, Richard. And the next question comes from Martin Yang with Oppenheimer. Please go ahead. Thank you for taking my question. First question is on CTG and the potential impact on your sales panel. Looks like CVG is more than just a distributor. Maybe he's doing some of the fulfillment functions. Can you give us more details on what CTG actually do to help you with IT licensing business? And should we expect the funnel size increase to accelerate with the CTG partnership? So this running answer to your last question is, yes, we should expect that.

Speaker Change: Great, thanks for your time Richard.

Speaker Change: And the next question comes from Morton Yang with Oppenheimer. Please go ahead.

Zhihua Yang: Oh, good afternoon. Thank you for taking my question. The first question is about CPG and its potential impact on your... Dell Spano. Looks like CVG is more than just a distributor. Maybe he's doing some fulfillment functions.

Brian Faith: And again, I'll remind everybody, this is also why we're investing in doing our EFPJ at Foundry's like Intel for ETA, because we want to be ready to respond really quickly when somebody comes in with an IP request that we've already got that fundamental work down on that Foundry and that process note, so we can quickly move to customer specific and IP delivery in order for revenue recognition. So I think we've got a lot of things lined up for the deliverables with that, laying on a couple of contracts to win, that we can then announce so everybody can see that, teeing up, being able to deliver those by the end of the year for that strong Q4 that we are predicting.

Morton Yang: Hi, good afternoon. Thank you for taking my question. My first question is on CTG and its impact, potential impact on your sales funnel. It looks like CTG is more than just a distributor, maybe it's doing some fulfillment functions. Can you give us more details on

Brian Faith: Can you give us more details on what CDG actually does to help you with your licensing business? And should we expect the funnel slide? are increased to accelerate with CTG.

Morton Yang: what CDG actually do to help you with IT licensing business and should we expect the funnel size increase to accelerate with the CDG partnership.

Brian Faith: The short answer to your last question is yes, we should expect that they're going to help accelerate that. But more importantly, I think they're going to help us accelerate qualified opportunities into the funnel because they're going to be doing a lot of pre-qualification work before we even assign our own resources to that. CDG is involved in both demand fulfillment and demand creation.

Brian Faith: They're going to help accelerate that. More importantly, I think they're going to help us accelerate qualified opportunities to the funnel because they're going to be doing a lot of pre-qualification work before we even assign our resources to that. CTG is involved in both demand fulfillment and demand creation. And one part of their business actually puts them in a very strong position with the defense industrial base. And that is sourcing technically obsolete devices.

Speaker Change: So the short answer to your last question is yes, we should expect that, that they're going to help accelerate that. More importantly, I think they're going to help us accelerate qualified opportunities to the funnel because they're going to be doing a lot of pre-qualification work before we even assign our own resources to that.

Brian Faith: So I'll still say, going back to your first question, which are there, the goal is still 10 for the year. Obviously, we're not there yet, but I think we have enough of these in the funnel that should have some decision points between now and early fall that we'll be able to close the gap that we have today to that 10.

Brian Faith: And one part of their business actually puts them in a very strong position with the defense industrial base, and that is sourcing technically obsolete devices. As a matter of fact, we work with CTG to stop some mature devices that we wanted to obsolete before. And by doing this, we didn't have to force customers to buy a lifetime supply through an end-of-life announcement. So it was really a smooth transition for us to optimize what we're supporting directly with our resources.

Speaker Change: CDG is involved in both demand fulfillment and demand creation. One part of their business actually puts them in a very strong position with the defense industrial base, and that is sourcing technically obsolete devices.

Brian Faith: And part of that is just companies that are taking vacations right now are coming back from the vacations and making these big decisions, part of that is the fact that I think some of these are government-funded proposals, and everybody knows the government fiscal year and September 30th, and then sort of open stuff, new rounds of funding for projects that are starting in the first week of April, or it's not April, if he's in October. So that should probably be another time frame that's sort of going to loosen up the rain since some of these proposals, and therefore the funding for them accordingly. Do that help? That does. It's a very, very full-sum commentary, Brian. I will jump out of line. Thanks, like us. Great.

Brian Faith: Thank you. and as a matter of fact, we work with CTG to stop some mature devices that we wanted to obsolete, you know, before. And by doing this, we didn't have to force customers to buy a lifetime supply through an end-of-life announcement. So it's really smooth transition from us to optimize what we're supporting directly with our resources. It also gives customers in the defense industrial base that sort of assurance that these parts are going to be available for the lifetime of their program. And so, with that as sort of a backbone reputation, I would say this is my opinion, but I think the defense industrial base feels secure working with CTG on new designs.

Speaker Change: As a matter of fact, we work with CTG to stop some mature devices that we wanted to obsolete before. And by doing this, we didn't have to force customers to buy a lifetime supply through an end-of-life announcement. So it was really a smooth transition from us.

Brian Faith: It also gives customers in the defense industrial base that sort of assurance that these parts are going to be available for the lifetime of their program. And so with that as sort of a backbone reputation, I would say, and this is my opinion, but I think the Defense Industrial Base feels secure working with CTG on new designs because they know they're going to maintain sourcing devices through the life cycle of the design.

Speaker Change: to optimize what we're supporting directly with our resources. It also gives customers in the defense industrial base that sort of assurance that these parts are going to be available for the lifetime of their program.

Speaker Change: And so with that as sort of a backbone reputation...

Speaker Change: I would say, this is my opinion, but I think the defense industrial base feels secure working with CTG on new designs.

Brian Faith: They know they're going to maintain sourcing devices through the life cycle of the design. So if I was them and I'm looking to do my own SOC or buy a custom device from a storefront, knowing that they have that stocking plan and that assurance plan and that they're fully focused on defense industrial base needs. I think they're a great partner for this. They're going to maintain that sourcing all the way through. And that's absolutely critical when you're talking about these programs in record that literally run decades. They've got a great reputation. So I think they're going to again, to sort of do all for us to map fulfillment and demand creation on both storefront and IP.

Richard Shannon: Thanks for your time, Richard.

Brian Faith: So if I were them and I'm looking to do my own SOC or buy a custom device from a storefront, knowing that they have that stocking plan and that assurance plan and that they're fully focused on the Defense Industrial Base needs, I think they're a great partner for this. They're going to maintain that sourcing all the way through, and that's absolutely critical when you're talking about these programs that literally run decades. They've got a great reputation, so I think they're going to, again, do sort of dual roles for us demand fulfillment and demand creation on both storefront and IP. Thank you. A question on the margin profiles.

Martin Yang: And the next question comes from Martin Yang with Oppenheimer.

Speaker Change: They know they're going to maintain sourcing devices through the life cycle of the design. So if I was them and I'm looking to do my own SOC or buy a custom device from a storefront,

Martin Yang: Please go ahead. Thank you for taking my question. First question is on CTG and the potential impact on your sales panel. Looks like CVG is more than just a distributor. Maybe he's doing some of the fulfillment functions. Can you give us more details on what CTG actually do to help you with IT licensing business? And should we expect the funnel size increase to accelerate with the CTG partnership? So this running answer to your last question is, yes, we should expect that.

Speaker Change: knowing that they have that stocking plan and that assurance plan and that they're fully focused on the defense industrial-based needs, I think they're a great partner for this. They're going to maintain that sourcing all the way through and that's absolutely critical when you're talking about these programs that literally run decades.

Speaker Change: they've got a great reputation so I think they're going to again do sort of dual for us, demand fulfillment and demand creation on both storefront and IP.

Elias Nader: Thank you.

Zhihua Yang: So for the year, can you remind us, you know, how should we think about a cadence for different OPEX items? Is there any, is it pretty even between three and? You're asking about the gross module, right?

Elias Nader: A question on the margin profiles. So for the year, can you remind us, you know, how should we think about the cadence for different opax items? Is there any, is there pretty even between three to four here? You're asking about the gross margin, right? Opax. Sorry, I'm not gross margin. Opax. Oh, opax. Okay. Well, I mean, it's simple. It's more like, for example, this quarter, we had liking to to to we had a specific, a specific payment going out to vendors that kind of just happened. It wasn't we were counting on it, but just all came together and was it kind of resulted in more cash usage, but still, Opax was about 2.9.

Speaker Change: Thank you. A question on margin profiles. So for the year, can you remind us, you know, how should we think about a cadence for different opex items? Is there any, is it pretty even between 3Q and 4Q?

Martin Yang: They're going to help accelerate that. More importantly, I think they're going to help us accelerate qualified opportunities to the funnel, because they're going to be doing a lot of pre-qualification work before we even assign our resources to that. CTG is involved in both demand fulfillment and demand creation. And one part of their business actually puts them in a very strong position with the defense industrial base. And that is sourcing technically obsolete devices.

Zhihua Yang: APEX. Okay. Well, I mean, it's simple.

Speaker Change: You're asking about the gross module, right?

Elias Nader: It's more like, for example, this quarter, we had, like in Q2, a specific payment going out to vendors that kind of just happened. We were counting on it, but it just all came together, and it kind of resulted in more cash usage, but still, APEX was about 2.9, same like last time, only 400K in addition. We think it's going to be flat. I think even if we hire two more people, it's still going to be flat quarter after quarter.

Speaker Change: OPEX, sorry, not gross margin, OPEX.

Speaker Change: OPEX, okay. Well, I mean, it's simple. It's more like, for example, this quarter we had, like in Q2, we had a specific payment

Martin Yang: Thank you, and as a matter of fact, we work with CTG to stop some mature devices that we wanted to obsolete, you know, before. And by doing this, we didn't have to force customers to buy a lifetime supply through an end of life announcement. So it's really smooth transition from us to optimize what we're supporting directly with our resources. It also gives customers in the defense industrial base that sort of assurance that these parts are going to be available for the lifetime of their program.

Speaker Change: Going out to vendors, that kind of just happened. We were counting on it, but just all came together and it kind of resulted in more cash usage. But still, OPEX was about 2.9, same like last time, only 400K in addition.

Elias Nader: It's in like last time, only 400K in addition. The thing is going to be flat. I think even if we hire two more people, as soon as going to be flat quarter after quarter. So I'm counting on it being flat to the end of the year.

Martin Yang: And so with that as sort of a backbone reputation, I would say this is my opinion, but I think the defense industrial base feels secure working with CTG on new designs. They know they're going to maintain sourcing devices through the life cycle of the design. So if I was them and I'm looking to do my own SOC or buy a custom device from a storefront, knowing that they have that stocking plan and that assurance plan and that they're fully focused on defense industrial base needs.

Speaker Change: The thing is going to be flat.

Speaker Change: I think even if we hire two or more people, it's still going to be flat quarter after quarter. So I'm counting on it being flat through the end of the year.

Operator: So I'm counting on it being flat through the end of the year. Thank you, Elias. This concludes our question and answer session. I would like to turn the conference back to Brian Faith for any closing remarks. Thanks, David, and thanks again for joining us today, everybody. Hopefully, we will connect with some of you at one of our upcoming investor events, including the Oppenheimer Technology Internet and Communications Conference this Wednesday, August 14th, the Needham Virtual Semiconductor and Semicap Conference next week, or at the H.C. Wainwright Global Investment Conference in early September. Thank you again for your participation, and have a great day. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Elias Nader: Thank you very much.

Speaker Change: Thank you, Elias. That's it for me.

Operator: This concludes our question in the answer session.

Brian Faith: I would like to turn the conference back to Brian Faith for any closing remarks. Thanks, David, and thanks again for joining us today, everybody. Hopefully we will connect with some of you at one of our upcoming investor events, including the Oppenheimer Technology, Internet, and Communications Conference this Wednesday, August 14. If you need a virtual semiconductor and semiconductor conference next week, or at the HC Wainwright Global Investment Conference, can go to the September.

Martin Yang: I think they're a great partner for this. They're going to maintain that sourcing all the way through. And that's absolutely critical when you're talking about these programs in record that literally run decades. They've got a great reputation. So I think they're going to again, to sort of do all for us to map fulfillment and demand creation on both storefront and IP. Thank you.

Speaker Change: This concludes our question and answer session. I would like to turn the conference back to Brian Faith for any closing remarks.

Brian Faith: Thanks, David, and thanks again for joining us today, everybody.

Brian Faith: Hopefully we will connect with some of you at one of our upcoming investor events, including the Oppenheimer Technology Internet and Communications Conference this Wednesday, August 14th.

Speaker Change: It's the Needham Virtual Semiconductor and Semicab Conference next week or at the H.C. Wainwright Global Investment Conference in early September. Thank you again for your participation and have a great day.

Martin Yang: A question on the margin profiles. So for the year, can you remind us, you know, how should we think about the cadence for different opax items? Is there any, is there pretty even between three to four here? You're asking about the gross margin, right? Opax. Sorry, I'm not gross margin. Opax. Oh, opax. Okay. Well, I mean, it's simple. It's more like, for example, this quarter, we had liking to to to we had a specific, a specific payment going out to vendors that kind of just happened.

Operator: Thank you again for your participation, and have a great day.

Operator: The conference is now concluded. Thank you for attending today's presentation.

Operator: You may now disconnect.

Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: [inaudible]

Martin Yang: It wasn't we were counting on it, but just all came together and was it kind of resulted in more cash usage, but still, opax was about 2.9. It's in like last time, only 400K in addition. The thing is going to be flat. I think even if we hire two more people, as soon as going to be flat quarter after quarter. So I'm counting on it being flat to the end of the year.

Martin Yang: Thank you very much.

Operator: This concludes our question in the answer session.

Brian Faith: I would like to turn the conference back to Brian faith for any closing remarks. Thanks, David and thanks again for joining us today, everybody.

Brian Faith: Hopefully we will connect with some of you at one of our upcoming investor events, including the Oppenheimer Technology Internet and communications conference this Wednesday, August 14.

Brian Faith: If you need a virtual semiconductor and semiconductor conference next week, or at the HC Wainwright Global Investment Conference, can go to the September.

Brian Faith: Thank you again for your participation and have a great day.

Operator: The conference is now concluded. Thank you for attending today's presentation.

Operator: You may now disconnect.

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