Q2 2025 QuickLogic Corp Earnings Call

Speaker #1: Ladies and gentlemen, good afternoon. At this time, I would like to welcome everyone to QuickLogic Corporation's second quarter fiscal 2025 earnings results conference call.

Alicia (Conference Operator): Ladies and gentlemen, good afternoon. At this time, I would like to welcome everyone to QUICKLOGIC's Corporation's second quarter fiscal 2025 earnings results conference call. As a reminder, today's call is being recorded for replay purposes through August 19th, 2025. I would now like to turn the conference over to Ms. Alison Ziegler of Darrow's Associates. Ms. Ziegler, please go ahead.

Speaker #1: As a reminder, today's call is being recorded for replay purposes through August 19, 2025. I would now like to turn the conference over to Ms. Alison Ziegler of Darrow's Associates.

Speaker #1: Ms. Ziegler, please go ahead.

Speaker #3: 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 statements regarding our future profitability and cash flows, expectations regarding our future business, and statements regarding the timing, milestones, and payments related to our government contracts, and statements regarding our ability to successfully exit Sentimental.

Speaker #3: As a reminder, some of the comments QUICKLOGIC makes today are forward-looking statements that involve risks and uncertainties, including but not limited to statements regarding our future profitability and cash flows, expectations regarding our future business, statements regarding the timing of milestones and payments related to our government contracts, and statements regarding our ability to successfully exit certain amounts.

Speaker #3: Actual results may differ due to a variety of factors, including delays in the market acceptance of the company's new products, the ability to convert design opportunities into customer revenue, our ability to replace revenue from end-of-life products, the level and timing of customer design activity, the market acceptance of our customers' products, the risks that new orders may not result in future revenue, our ability to introduce and produce new products based on advanced wafer technology on a timely basis, our ability to adequately market the low-power competitive pricing and short time to market of our new products, intense competition from competitors, our ability to hire and retain qualified personnel, changes in product demand or supply, general economic conditions, political events, international trade disputes, natural disasters, and other business interruptions that could disrupt the supply or delivery of, or demand for, the company's products, as well as changes in tax rates and exposure to additional tax liabilities.

Alison Ziegler: Actual results may differ due to a variety of factors, including delays in the market acceptance of the company's new products, the ability to convert design opportunities into customer revenue, our ability to replace revenue from end-of-life products, the level and timing of customer design activity, the market acceptance of our customers' products, the risk that new orders may not result in future revenue, our ability to introduce and produce new products based on advanced wafer technology on a timely basis, our ability to adequately market the low-power competitive pricing and short time-to-market of our new product, intense competition by competitors, our ability to hire and retain qualified personnel, changes in product demand or supply, general economic conditions, political events, international trade disputes, national disasters, and other business interruptions that could disrupt supply or delivery of or demand for the company's products, and changes in tax rates and exposure to additional tax liabilities.

Speaker #3: For more detailed discussions on the risks, uncertainties, and assumptions that could result in these differences, please refer to the risk factors discussed in QuickLogic's most recently filed periodic report with the SEC.

Alison Ziegler: For more detailed discussions on the risks, uncertainties, and assumptions that could result in these differences, please refer to the risk factors discussed in QUICKLOGIC's most recently fired 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. We have also posted an updated financial table on our IR webpage that provides current and historical non-GAAP data. Please note QUICKLOGIC uses its website, the company blog, corporate Twitter account, Facebook page, and LinkedIn page as channels of distribution of information about its business.

Speaker #3: 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 #3: In today's call, we will be reporting non-GAAP financial measures. You may refer to the earnings released we issued today for a detailed reconciliation of our GAAP to non-GAAP results, and other financial statements.

Speaker #3: We have also posted an updated financial table on our IR webpage that provides current and historical non-GAAP data. Please note, QUICKLOGIC uses its website, the company blog, corporate Twitter account, Facebook page, and LinkedIn page as channels of distribution of information about its business.

Speaker #3: Such information may be deemed material information, and QUICKLOGIC may use these channels to comply with its disclosure obligations under Regulation SC. 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.

Alison Ziegler: Such information may be deemed material information, and QUICKLOGIC may use these channels to comply with its disclosure obligations under Regulation SD. 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. I'd now like to turn the call over to Brian. Go ahead, Brian.

Speaker #3: I'd now like to turn the call over to Brian. Go ahead, Brian.

Speaker #4: Thank you, Alison, and good afternoon. Since our last conference call, we have focused considerable engineering resources towards two strategic initiatives that we will discuss today.

Brian Faith: Thank you, Alison, and good afternoon. Since our last conference call, we have focused considerable engineering resources towards two strategic initiatives that we will discuss today. We strongly believe these initiatives will accelerate storefront design wins for our strategic RadHard FPGA and expand our served-available market to include very high-density eFPGA hard IP designs targeting advanced fabrication nodes and eFPGA designs that require certain advanced capabilities. This allocation of engineering resources has pushed deliverables and associated revenue recognition forward for several contracts. This has decreased our revenue outlook for Q3, but it is expected to fuel a substantial increase in Q4 revenue. Now let's discuss what drove us to make these decisions and the opportunities we expect them to enable beginning in Q4. It has been well publicized that the DOD has prioritized certain strategic defense systems, including Golden Dome.

Speaker #4: We strongly believe these initiatives will accelerate storefront design wins for our strategic Red Hawk FPGA and expand our serviceable available market to include very high-density EFPGA hard IP designs targeting advanced fabrication nodes, as well as EFPGA designs that require certain advanced capabilities.

Speaker #4: This allocation of engineering resources has pushed deliverables and associated revenue recognition forward for several contracts. This has decreased our revenue outlook for Q3, but it is expected to fuel a substantial increase in Q4 revenue.

Speaker #4: Now, let's discuss what drove us to make these decisions and the opportunities we expect them to enable beginning in Q4. It has been well-publicized that the DOD has prioritized certain strategic defense systems, including Golden Dome.

Speaker #4: As a result, U.S.-based defense contractors have accelerated the development of the associated programs. Many of these programs will require radiation-tolerant and, in some cases, strategic radiation-hardened semiconductor devices that are fabricated in the U.S.

Brian Faith: As a result, US-based defense contractors have accelerated the development of the associated programs. Many of these programs will require radiation-tolerant and, in some cases, strategic radiation-hardened semiconductor devices that are fabricated in the US. Due to this, we took steps to ensure we are ready to support this accelerated development. After working nights and weekends, our engineering team delivered design files on Sunday to GlobalFoundries to fabricate a strategic RadHard or SRH FPGA test chip using its 12LP fabrication node. This initiative was financed by QUICKLOGIC and is independent from our contract with the US government. Our decision to invest the money and resources to develop this test chip now is based on our belief that it is critical to helping us secure strategic design wins and accelerate our storefront business model.

Speaker #4: Due to this, we took steps to ensure we are ready to support this accelerated development. After working nights and weekends, our engineering team delivered design files on Sunday to global foundries.

Speaker #4: To fabricate a strategic Red Heart (SRH) FPGA test chip using its 12 LP fabrication node. This initiative was financed by QUICKLOGIC and is independent from our contract with the U.S.

Speaker #4: Government. Our decision to invest the money and resources to develop this test chip now is based on our belief that it is critical to helping us secure strategic design wins and accelerate our storefront business model.

Speaker #4: We have been discussing this initiative with certain large DIBs for a couple of years, who have programs in development today that are good candidates for an SRH FPGA.

Brian Faith: We have been discussing this initiative with certain large DIBs for a couple of years who have programs in development today that are good candidates for an SRH FPGA. We have designed the test chip to meet their requirements. To ensure we are ready to leverage this opportunity and our accelerated introduction of AUSTRALIS 2.0, which I'll discuss in a moment, we raised money in June and early July with our established ATM. We anticipate ROI from our SRH FPGA test chip initiative beginning in 2026, and if we are successful in winning designs, we believe storefront production contracts could be worth hundreds of millions of dollars in the coming years. When we initiated our work to develop an SRH FPGA test chip, we believed certain DIBs would be ready to evaluate it in early 2026.

Speaker #4: We have designed the test chip to meet their requirements. To ensure we are ready to leverage this opportunity, and our accelerated introduction of Astrolis 2.0, which I'll discuss in a moment, we raised the money in June and early July with our established ATM.

Speaker #4: We anticipate ROI from our SRH FPGA test chip initiative beginning in 2026. If we are successful in winning designs, we believe storefront production contracts could be worth hundreds of millions of dollars in the coming years.

Speaker #4: When we initiated our work to develop an SRH FPGA test chip, we believed certain DIBs would be ready to evaluate it in early 2026.

Speaker #4: However, during a conversation within the last week with one of the large dibs, I was advised they would like access to the test chip as soon as possible, and told me the test chip, as it is defined, may satisfy their program requirements.

Brian Faith: However, during a conversation within the last week with one of the large DIBs, I was advised they would like access to the test chip as soon as possible and told me the test chip, as it is defined, may satisfy their program requirements. I know from speaking with investors at conferences and by phone that many of you are focused on the phenomenal growth potential of our storefront business model. I couldn't agree more, and I can assure you that I am intensely focused on executing the prerequisites needed to realize this objective. These include completing the first tapeout that we internally funded in nearly a decade. The SRH FPGA technology we've developed is the foundation of our storefront model, and getting a 12LP test chip in the hands of the DIBs that are developing strategic defense systems today is a critical element to our success.

Speaker #4: I know from speaking with investors at conferences and by phone that many of you are focused on the phenomenal growth potential of our storefront business model.

Speaker #4: I couldn't agree more, and I can assure you that I am intensely focused on executing the prerequisites needed to realize this objective. These include completing the first tapeout that we internally funded in nearly a decade.

Speaker #4: The SRH FPGA technology we've developed is the foundation of our storefront model, and getting a 12 LP test chip in the hands of the dibs that are developing strategic defense systems today is a critical element to our success.

Speaker #4: The importance of demonstrating our SRH FPGA test chip goes well beyond the storefront designs we believe it will enable us to secure. FPGA is the number one spend category for semiconductor devices by the Defense Industrial Base.

Brian Faith: The importance of demonstrating our SRH FPGA test chip goes well beyond the storefront designs we believe it will enable us to secure. FPGA is the number one spend category for semiconductor devices by the defense industrial base, and custom ASICs are a close second. Together, we believe these two categories make up roughly half of the DIB semiconductor TAM. We expect many of these new strategic designs will use either discrete FPGA devices that we can storefront or embedded FPGA IP we can license in new ASIC designs. By delivering a discrete SRH FPGA test chip fabricated on the 12LP process, we are demonstrating the broader capability of our eFPGA hard IP for ASIC applications that will need to either be radiation-tolerant or SRH. We introduced AUSTRALIS in 2021.

Speaker #4: And custom ASICs are a close second. Together, we believe these two categories make up roughly half of the DIB semiconductor TAM. We expect many of these new strategic designs will use either discrete FPGA devices that we can storefront or embedded FPGA IP we can license in new ASIC designs.

Speaker #4: By delivering a discrete SRH FPGA test chip fabricated on the 12 LP process, we are demonstrating the broader capability of our EFPGA hard IP for ASIC applications, that will need to either be radiation-tolerant or SRH.

Speaker #4: We introduced Astrolis in 2021. It is a proprietary tool that we use internally to quickly generate customer-specific EFPGA hard IP, and it provides us with a substantial competitive advantage.

Brian Faith: It is a proprietary tool that we use internally to quickly generate customer-specific eFPGA hard IP, and it provides us with a substantial competitive advantage. While we have refined AUSTRALIS through the years to enhance these advantages, the release of version 2.0 will mark its first significant update. Our success in advanced fabrication nodes, which include 12-nanometer nodes at GlobalFoundries and TSMC and Intel 18A, have led to customer contracts and engagements for very high-density eFPGA IP cores that will require the advancements we are introducing with AUSTRALIS 2.0. These include an awarded 12-nanometer contract, a pending 12-nanometer contract, and a potential Intel 18A contract for a 1 million-plus LUT or lookup table production design. We are also seeing customer requirements for faster core speeds, improved silicon utilization, and certain new features for high-reliability applications. AUSTRALIS 2.0 will support these requirements and more.

Speaker #4: While we have refined Astrolis through the years to enhance these advantages, the release of version 2.0 will mark its first significant update. Our success in advanced fabrication nodes, which include 12-nanometer nodes at global foundries and TSMC, and Intel 18A, have led to customer contracts and engagements for very high-density EFPGA IP cores, that will require the advancements we are introducing with Astrolis 2.0.

Speaker #4: These include an awarded 12-nanometer contract, a pending 12-nanometer contract, and a potential Intel 18A contract for a $1 million-plus LUT, or lookup table, production design.

Speaker #4: We are also seeing customer requirements for faster core speeds, improved silicon utilization, and certain new features for high-reliability applications. Astrolis 2.0 will support these requirements and more.

Speaker #4: Due to these factors, we have given Astrolis 2.0 a very high priority. We are confident that we will deliver our first EFPGA hard IP using Astrolis 2.0 for an existing revenue-generating contract during Q4.

Brian Faith: Due to these factors, we have given AUSTRALIS 2.0 a very high priority. We are confident that we will deliver our first eFPGA hard IP using AUSTRALIS 2.0 for an existing revenue-generating contract during Q4. While we are also confident this will contribute to a substantial sequential increase in Q4 revenue, some of the revenue that we've pushed forward may extend into early Q1. Due to this, we are conservatively projecting a modest decrease in full-year 2025 revenue relative to 2024. AUSTRALIS, including the soon-to-be completed version 2.0, is our proprietary hard IP generation tool that we use internally. Aurora is the development tool we provide to our customers. The two tools work hand in hand and together optimize the efficiency of the design process, hard IP generation, and the resulting PPA of the silicon implementation. PPA is an industry term meaning power, performance, and area.

Speaker #4: While we are also confident this will contribute to a substantial sequential increase in Q4 revenue, some of the revenue that we've pushed forward may extend into early Q1.

Speaker #4: Due to this, we are conservatively projecting a modest decrease in full year 2025 revenue relative to 2024. Astrolis, including the soon-to-be-completed version 2.0, is our proprietary hard IP generation tool that we use internally.

Speaker #4: Aurora is the development tool we provide to our customers. The two tools work hand in hand, and together optimize the efficiency of the design process, hard IP generation, and the resulting PPA of the silicon implementation.

Speaker #4: PPA is an industry term meaning power, performance, and area. Aurora started out as a development platform with open-source synthesis, which was fine for trailing-edge fabrication nodes and low to medium density designs.

Brian Faith: Aurora started out as a development platform with open-source synthesis, which was fine for trailing-edge fabrication nodes and low to medium-density designs. However, many of the large customers we are currently engaged with prefer the Synopsys Simplify FPGA design tool, which is particularly beneficial for leading-edge fabrication nodes and high-density designs. To accommodate this requirement as quickly as possible, we adopted Aurora 2.9 to be compatible with Simplify and branded it Aurora Pro 2.9. We discussed this in our February conference call. Since then, we've worked closely with Synopsys to optimize Simplify for our proprietary architecture and seamlessly integrated it into Aurora Pro. This was covered in a press release issued July 28th. The integration of Simplify is tailored to QUICKLOGIC's eFPGA architecture and includes optimizations for embedded carry chains, block RAM, and DSP blocks.

Speaker #4: However, many of the large customers we are currently engaged with prefer the Synopsis Simplify FPGA design tool, which is particularly beneficial for leading-edge fabrication nodes and high-density designs.

Speaker #4: To accommodate this requirement as quickly as possible, we adopted Aurora 2.9 to be compatible with Simplify and branded it Aurora Pro 2.9. We discussed this in our February conference call.

Speaker #4: Since then, we've worked closely with Synopsis to optimize Simplify for our proprietary architecture, and seamlessly integrated it into Aurora Pro. This was covered in a press release issued July 28th.

Speaker #4: The integration of Simplify is tailored to QUICKLOGIC's EFPGA architecture and includes optimizations for embedded carry chains, block RAM, and DSP blocks. This significantly reduces critical path delays and accelerates design convergence, resulting in up to a 35% improvement in maximum frequency.

Brian Faith: This significantly reduces critical path delays and accelerates design convergence, resulting in up to a 35% improvement in maximum frequency. This integration also delivers up to a 50% improvement in resource utilization, as demonstrated by customer designs achieving over 96% LUT utilization. Now, a brief update on our US government SRH FPGA contract. Q3 will mark the low point for revenue recognition this year on our US government SRH FPGA contract. We completed our deliverables on schedule and recognized the associated revenue during Q2. We are now waiting on the completion of key deliverables from a subcontractor. Due to this, revenue recognition from our SRH FPGA contract will be de minimis in Q3, followed by an anticipated rebound in Q4 that is funded by the current tranche. As we previously announced, we delivered customer-specific eFPGA hard IP for a customer test chip targeting Intel 18A late last April.

Speaker #4: This integration also delivers up to a 50% improvement in resource utilization, as demonstrated by customer designs achieving over 96% LUT utilization. Now, a brief update on our U.S.

Speaker #4: The U.S. government SRH FPGA contract will see Q3 mark the low point for revenue recognition this year. We completed our deliverables on schedule and recognized the associated revenue during Q2.

Speaker #4: We are now waiting on the completion of key deliverables from a subcontractor. Due to this, revenue recognition from our SRH FPGA contract will be de minimis in Q3, followed by an anticipated rebound in Q4 that is funded by the current tranche.

Speaker #4: As we previously announced, we delivered customer-specific EFPGA hard IP for a customer test chip targeting Intel 18A late last April. This test chip is moving through fabrication, and we expect to have our allocation of test chips in hand for evaluation towards the end of Q4.

Brian Faith: This test chip is moving through fabrication, and we expect to have our allocation of test chips to be in hand for evaluation towards the end of Q4. We have booked a second test chip contract with this US-based customer valued at $500,000 that is scheduled for delivery in Q3. In addition to this, we have also been awarded a six-figure feasibility contract for a 1 million-plus LUT design that we are scheduled to complete in Q4. We anticipate this will lead to an eFPGA IP contract for a high-density chiplet design during the first half of 2026. In our May conference call, I stated that a mid-seven-figure contract with this customer targeting Intel 18A was delayed due to the timing of government funding.

Speaker #4: We have booked a second test chip contract with this U.S.-based customer, valued at $500,000, that is scheduled for delivery in Q3. In addition to this, we have also been awarded a six-figure feasibility contract for a $1 million plus LUT design that we are scheduled to complete in Q4.

Speaker #4: We anticipate this will lead to an EFPGA IP contract for a high-density chiplet design during the first half of 2026. In our May conference call, I stated that a mid-seven-figure contract with this customer targeting Intel 18A was delayed due to the timing of government funding.

Speaker #4: The customer advised us that it was awarded funding for the program, but funding for the production ASIC, which is a subcomponent of the program, would not be awarded until Q4.

Brian Faith: The customer advised us that it was awarded funding for the program, but funding for the production ASIC, which is a subcomponent of the program, would not be awarded until Q4. Beyond the base of business, we are rapidly building with this customer. We have multiple Intel 18A engagements with other DIBs and with commercial customers that we believe will result in significant contracts beginning in Q4. Last quarter, I mentioned that we were in early discussions with customers regarding a digital proof-of-concept chiplet strategy that would give them a head start in chiplet development while standards are still in a state of flux. These discussions have expanded to include two of our large strategic partners who will actively help us promote the digital proof-of-concept chiplet we have jointly specified directly to potential end customers as a QUICKLOGIC storefront device.

Speaker #4: Beyond the base of business we are rapidly building with this customer, we have multiple Intel 18A engagements with other DIBs, and with commercial customers that we believe will result in significant contracts beginning in Q4.

Speaker #4: Last quarter, I mentioned that we were in early discussions with customers regarding a digital proof-of-concept chiplet strategy that would give them a head start in chiplet development while standards are still in a state of flux.

Speaker #4: These discussions have expanded to include two of our large strategic partners, who will actively help us promote the digital proof-of-concept chiplet we have jointly specified, directly to potential end customers as a QUICKLOGIC storefront device.

Speaker #4: Due to the fact we can leverage our existing library for the EFPGA core in the chiplet, and integrate that with readily available third-party IP, the digital proof of concept chiplet will be completed before our next conference call, and will be a low-cost investment with potentially very high return as a storefront device.

Brian Faith: Due to the fact we can leverage our existing library for the eFPGA core in the chiplet and integrate that with readily available third-party IP, the digital proof-of-concept chiplet will be completed before our next conference call and will be a low-cost investment with potentially very high return as a storefront device. It will be designed to target any of the advanced fabrication nodes we've discussed and can be easily modified to fit customer-specific requirements. Please note this digital proof-of-concept chiplet initiative will not utilize engineering resources that we have dedicated to AUSTRALIS 2.0, our 12LP SRH test chip, or revenue-generating hard IP contracts. Before turning the call over to Elias, I would like to take a moment to acknowledge the passing of Christine Russell, who served as a QUICKLOGIC board director and audit committee chair for two decades. She was a dear friend and will be missed.

Speaker #4: It will be designed to target any of the advanced fabrication nodes we've discussed, and can be easily modified to fit customer-specific requirements. Please note, this digital proof of concept chiplet initiative will not utilize engineering resources that we have dedicated to Astrolis 2.0, our 12 LP SRH test chip, or revenue-generating hard IP contracts.

Speaker #4: Before turning the call over to Elias, I would like to take a moment to acknowledge the passing of Christine Russell, who served as a QUICKLOGIC board director and audit committee chair for two decades.

Speaker #4: She was a dear friend and will be missed. Ron Shelton has joined as a new member of our Board of Directors and will assume the role of Audit Committee Chair.

Brian Faith: Ron Shelton has joined as a new member of our board of directors and will assume the role of audit committee chair. Ron has served as chief financial officer for both public and private semiconductor companies for more than 25 years and is very well respected across Silicon Valley. Ron is also very well connected with investment bankers and analysts, some of whom already cover QUICKLOGIC. We look forward to his strategic insights and guidance contributing to the company's continued growth and success. With this, I will turn the call over to Elias for financial results and outlook.

Speaker #4: Ron has served as Chief Financial Officer for both public and private semiconductor companies for more than 25 years and is very well-respected across Silicon Valley.

Speaker #4: Ron has also very well connected with investment bankers and analysts, some of whom already cover QuickLogic. We look forward to his strategic insights and guidance contributing to the company's continued growth and success.

Speaker #4: With this, I will turn the call over to Elias for financial results and outlook.

Speaker #5: Thank you, Brian. And good afternoon, everyone. Total second-quarter revenue was $3.7 million. Total revenue was down 10.7% from Q2 2024 and down 15% compared to Q1 2025.

Elias Nader: Thank you, Brian, and good afternoon, everyone. Total second quarter revenue was 3.7 million. Total revenue was down 10.7% from Q2 2024 and down 15% compared to Q1 2025. Revenue was below the midpoint of guidance due to lower discrete FPGA revenue and slightly lower revenue recognition from existing IP customers than we had forecasted. New product revenue in Q2 was 2.9 million, down 4.5% from Q2 2024, and down 22.3% compared to Q1 2025. Mature product revenue was 0.8 million, down from 1.1 million in the second quarter of 2024, and up from 0.6 million in the first quarter of 2025. Non-GAAP gross margin in Q2 was 31%. This compared with non-GAAP gross margin of 54.4% in Q2 2024 and 47.1% in Q1 2025.

Speaker #5: Revenue was below the midpoint of guidance due to lower discrete FPGA revenue and slightly lower revenue recognition from existing IP customers than we had forecasted.

Speaker #5: New product revenue in Q2 was $2.9 million, down 4.5% from Q2 2024, and down 22.3% compared to Q1 2025. Mature product revenue was $0.8 million, down from $1.1 million in the second quarter of 2024, and up from $0.6 million in the first quarter of 2025.

Speaker #5: Non-GAAP gross margin in Q2 was 31%; this compared with a non-GAAP gross margin of 54.4% in Q2 2024 and 47.1% in Q1 2025. The primary reason this was below our outlook includes the fact that approximately 350 thousand dollars of R&D costs that we projected would be allocated to OPEX were instead allocated to COGS.

Elias Nader: The primary reason this was below our outlook includes the fact that approximately 350,000 of R&D costs that we projected would be allocated to OPEX were instead allocated to COGS. In addition, we took an inventory reserve of a little over $100,000. Beyond that, it is attributable to less favorable absorption of fixed costs due to lower than anticipated revenue, product mix, and certain investments that have been detailed by Brian. Non-GAAP operating expenses in Q2 were approximately $2.5 million. This was approximately 350,000 below the low end of our outlook due to the COGS allocation I just mentioned. This compares with non-GAAP operating expenses of 2.9 million in the second quarter of 2024 and 3.1 million in the first quarter of 2025. Non-GAAP net loss was 1.5 million or 9 cents per share.

Speaker #5: In addition, we took an inventory reserve of a little over $100,000. Beyond that, it is attributable to less favorable absorption of fixed costs due to lower than anticipated revenue, product mix, and certain investments that have been detailed by Brian.

Speaker #5: Non-GAAP operating expenses in Q2 were approximately $2.5 million. This was approximately $350,000 below the low end of our outlook, due to the COGS allocation I just mentioned.

Speaker #5: This compares with non-GAAP operating expenses of $2.9 million in the second quarter of 2024 and $3.1 million in the first quarter of 2025. Non-GAAP net loss was $1.5 million, or $0.09 per share. This compares to a non-GAAP net loss of $0.7 million, or $0.05 per share in Q2 2024, and a non-GAAP net loss of $1.1 million, or $0.07 per share in the first quarter of fiscal 2025.

Elias Nader: This compares to a non-GAAP net loss of 0.7 million or 5 cents per share in Q2 2024 and a non-GAAP net loss of 1.1 million or 7 cents per share in the first quarter of fiscal 2025. The difference between our GAAP and non-GAAP results is related to non-cash stock-based compensation expenses, impairment charges, and restructuring costs. Stock-based compensation for Q2 was 0.8 million. Impairment charges for Q2 were 0.3 million, and restructuring costs for Q2 were $21,000. Stock-based compensation was 0.9 million in Q2 2024 and 0.9 million in Q1 2025. Restructuring costs were 0.1 million in Q1 2025. For the second quarter, three customers and one distributor accounted for 10% or more of total revenue. At the close of Q2, total cash was 19.2 million, inclusive of utilization of $15 million from our $20 million credit facility.

Speaker #5: The difference between our GAAP and non-GAAP results is related to non-cash stock-based compensation expenses, impairment charges, and restructuring costs. Stock-based compensation for Q2 was $0.8 million, impairment charges for Q2 were $0.3 million, and restructuring costs for Q2 were $21,000.

Speaker #5: Stock-based compensation was $0.9 million in Q2 2024 and $0.9 million in Q1 2025. Restructuring costs were $0.1 million in Q1 2025. For the second quarter, three customers and one distributor accounted for 10% or more of total revenue.

Speaker #5: At the close of Q2, total cash was $19.2 million, inclusive of utilization of $15 million from our $20 million credit facility. This compares with $17.5 million, inclusive of usage of $15 million from our $20 million credit facility, at the close of Q1 2025.

Elias Nader: This compares with 17.5 million, inclusive of usage of 15 million from our 20 million credit facility at the close of Q1 2025. Nets of the approximately $2.9 million raised in ATM sales during the quarter to support the strategic objectives Brian has outlined, a cash usage in Q2 was approximately 1.3 million. Now moving to our guidance and outlook for our fiscal third quarter, which will end on September 28th, 2025. Revenue guidance for Q3 2025 is approximately $2 million plus or minus 10%. Third quarter revenue is expected to be comprised of approximately 1.1 million in new products and 0.9 million in mature products. As Brian stated in his remarks, our decision to focus engineering resources on the tapeout of our SRH FPGA test chip and the accelerated introduction of AUSTRALIS 2.0 pushed out deliverables and the associated revenue recognition for several contracts.

Speaker #5: Nets of the approximately $2.9 million raised in ATM sales during the quarter, to support the strategic objectives Brian has outlined, are cash usage in Q2 was approximately $1.3 million.

Speaker #5: Now, moving to our guidance and outlook for our fiscal third quarter, which will end on September 28, 2025. Revenue guidance for Q3 2025 is approximately $2 million, plus or minus 10%.

Speaker #5: Third quarter revenues are expected to be comprised of approximately $1.1 million in new products and $0.9 million in mature products. As Brian stated in his remarks, our decision to focus engineering resources on the tapeout of our SRH FPGA test chip and the accelerated introduction of Astrolis 2.0 pushed out deliverables and the associated revenue recognition for several contracts.

Speaker #5: This decreased our revenue outlook for Q3, but it is expected to fuel a substantial increase in Q4 revenue. Based on the anticipated Q3 revenue mix, non-GAAP gross margin for the third quarter is expected to be approximately 5%.

Elias Nader: This decreased our revenue outlook for Q3, but it is expected to fuel a substantial increase in Q4 revenue. Based on the anticipated Q3 revenue mix, non-GAAP gross margin for the third quarter is expected to be approximately 5%. The lower gross margin is attributable to the unfavorable absorption of fixed costs due to low anticipated revenue. With the significant revenue rebound we anticipate beginning in Q4, we are modeling full-year 2025 revenue will be modestly lower than 2024, and full-year 2025 non-GAAP gross profit margin in the low to mid-50% range. Our Q3 non-GAAP operating expenses are expected to be approximately 3.2 million plus or minus 5%. We are modeling our non-GAAP OPEX to be approximately 12 million for fiscal year 2025. Please note that given the nature of our industry, we may occasionally need to classify certain expenses to COGS versus OPEX or capitalize certain costs.

Speaker #5: The lower gross margin is attributable to the unfavorable absorption of fixed costs, due to lower anticipated revenue. With this significant revenue rebound, we anticipate that beginning in Q4, we are modeling full year 2025 revenue to be modestly lower than 2024, and full year 2025 non-GAAP gross profit margin in the low to mid 50% range.

Speaker #5: Our Q3 non-GAAP operating expenses are expected to be approximately $3.2 million, plus or minus 5%. We are modeling our non-GAAP OPEX to be approximately $12 million for fiscal year 2025.

Speaker #5: Please note that, given the nature of our industry, we may occasionally need to classify certain expenses as COGS versus OPEX or capitalize certain costs.

Speaker #5: The classifications are related to labor and tooling for our IP contracts with customers. This may cause variability in our quarterly gross margins and operating results that we usually balance out on the operating line.

Elias Nader: The classifications are related to labor and tooling for our IP contracts with customers. This may cause variability in our quarterly gross margins and operating results that we usually balance out on the operating line. After interest and other income, we forecast that our Q3 non-GAAP net loss will be approximately 3.2 million to 3.4 million or 20 cents to 22 cents per share. The main driver between our GAAP and non-GAAP results is related to non-cash stock-based compensation expenses. In Q3, we expect this compensation will be approximately $0.9 million. This is the same as Q2 2025 and is down $300,000 from Q3 2024. 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.

Speaker #5: After interest and other income, we forecast that our Q3 non-GAAP net loss will be approximately $3.2 million to $3.4 million, or $0.20 to $0.22 per share.

Speaker #5: The main driver between our GAAP and non-GAAP results is related to non-cash, stock-based compensation expenses. In Q3, we expect this compensation will be approximately $0.9 million.

Speaker #5: This is the same as Q2 2025, and is down $300,000 from Q3 2024. As a reminder, there will be movement in our stock-based compensation during the year.

Speaker #5: And it may vary each quarter based on the timing of grants. We are anticipating Q3 usage will be similar to Q2 2025, and rebound to solidly positive cash flow and non-GAAP profitability in Q4.

Elias Nader: We're anticipating Q3 usage will be similar to Q2 '25 and rebound to solidly positive cash flow and non-GAAP profitability in Q4. Thank you all. With that, let me now turn the call over to Brian for his closing remarks.

Speaker #5: Thank you all. With that, let me now turn the call over to Brian for his closing remarks.

Speaker #4: Thank you, Elias. The decisions we made during the second half of Q2 to prioritize the tapeout of our SRH FPGA test chip on GlobalFoundries' 12LP process and to maintain the accelerated release schedule for Astrolis 2.0 were not made lightly.

Brian Faith: Thank you, Elias. The decisions we made during the second half of Q2 to prioritize the tapeout of our SRH FPGA test chip on GlobalFoundries' 12LP process and maintain the accelerated release schedule for AUSTRALIS 2.0 were not made lightly. While these decisions have dramatically reduced our revenue outlook for one quarter, the upside potential of the investments is exponential. With these investments, we have an opportunity to accelerate our storefront business model and significantly expand our served-available market to address applications that require high-density FPGAs. This is a very large market that is currently dominated by discrete FPGAs from our largest competitors. Expanding our capability to integrate these traditionally discrete FPGA designs into ASICs using AUSTRALIS 2.0 is a huge opportunity for QUICKLOGIC that we will be ready to execute in Q4. I realize we have provided a considerable amount of new information today.

Speaker #4: While these decisions have dramatically reduced our revenue outlook for one quarter, the upside potential of the investments is exponential. With these investments, we have an opportunity to accelerate our storefront business model and significantly expand our serviceable available market to address applications that require high-density FPGAs.

Speaker #4: This is a very large market that is currently dominated by discrete FPGAs from our largest competitors. Expanding our capability to integrate these traditionally discrete FPGA designs into ASICs using Astrolis 2.0 is a huge opportunity for QUICKLOGIC that we will be ready to execute in Q4.

Speaker #4: I realize we have provided a considerable amount of new information today. Due to this, we've done our best to keep our presentation concise today to allow more time for your questions.

Brian Faith: Due to this, we've done our best to keep our presentation concise today to allow more time for your questions. With that, we will now open the call for Q&A. Alicia, back to you.

Speaker #4: With that, we will now open the call for Q&A. Alicia, back to you.

Speaker #1: Thank you. We'll now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad.

Alicia (Conference Operator): Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Thank you. Our first question comes from the line of Rick Needon with RiverStore Investment Research. Please proceed.

Speaker #1: A confirmation tone will indicate your line is in the question queue. You may press *2 if you would like to remove your question from the queue.

Speaker #1: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions.

Speaker #1: Thank you. Our first question comes from the line of Rick Needon with Riversore Investment Research. Please proceed.

Speaker #6: Hello, Brian. Hello, Elias. Good afternoon.

Rick Neaton: Hello, Brian. Hello, Elias.

Elias Nader: Good afternoon. Hello, Rick.

Speaker #5: Hello, Rick.

Speaker #6: In In asking in digging into your strategic decision to advance the test chip in Astrolis over more certain business, it could have it could possibly have accrued in Q3, it sounds like from your description of the density of some of the of what you're targeting, that you're actually targeting the most widely known competitors, and the FPGA market.

Rick Neaton: In asking, in digging into your strategic decision to advance the test chip in AUSTRALIS over more certain business that could possibly have accrued in Q3, it sounds like from your descriptions of the density of some of what you're targeting, that you're actually targeting the most widely known competitors in the FPGA market, namely Intel's Alterra, while it's still at Intel, and AMD's Xilinx in the US. How quickly can this particular defense business ramp into storefront business over the coming quarters? Can you give us some color on that?

Speaker #6: Namely, Intel's Altera, while it's still at Intel, and AMD's Xilinx. In the U.S., how quickly can this particular defense business ramp into storefront business over the coming quarters?

Speaker #6: Can you give us some color on that?

Speaker #4: Yeah, I can, and I think one of the points we're trying to convey in our prepared remarks is just how fast this is moving.

Brian Faith: Yeah, I can. And I think one of the points we're trying to convey in the prepared remarks is just how fast this is moving with the engagement with the defense industrial base and what accelerated, in particular, the tapeout that we funded on the strategic RadHard FPGA. So I think the short answer is that we could start seeing some test chip revenue very early 2026. And we're anticipating having some of these devices on boards for customer engagement. And that's based on our ability to supply those.

Speaker #4: With the engagement with the defense industrial base and what accelerated, in particular, the tapeout that we funded on the strategic Red Heart FPGA. So I think the short answer is that we could start seeing some test chip revenue very early 2026, and we're anticipating having some of these devices on boards for customer engagement.

Speaker #4: And that's based on our ability to supply those. If we think about the demand side, conversations I've been having over the last couple of weeks have really emboldened us to go and accelerate this tapeout because I think we can all see from the news that there is a tremendous push not only to strengthen the systems that give us national security, but to do those in a way that they're manufactured and fabricated in onshore foundries.

Brian Faith: If we think about the demand side, conversations I've been having over the last couple of weeks have really emboldened us to go and accelerate this tapeout because I think we can all see from the news that there is a tremendous push not only to strengthen the systems that give us national security, but to do those in a way that they're manufactured and fabricated in onshore boundaries. And if we look back at the last two years of the developments that we've been doing, more often than not, our eFPGA IP core developments have been in US boundaries with GlobalFoundries on 12LP and 22FDX and with Intel on 18A.

Speaker #4: And if we look back at the last two years of the developments that we've been doing, more often than not, our EFPGA IP core developments have been in the U.S.

Speaker #4: foundries. With global foundries, on 12 LP and 22 FDX, and with Intel on 18A. And I think knowing that that demand is there, I think we've said multiple times now, the DOD spends north of, looks like $5 billion a year on semiconductors, and I think roughly half of that is a mix of FPGA and ASICs.

Brian Faith: And I think knowing that that demand is there, I think we've said multiple times now that DOD spends north of, looks like, $5 billion a year on semiconductors, and I think roughly half of that is a mix of FPGA and ASIC. So the sooner we can get an FPGA test chip taped out and manufactured in the hands of people, we can start engaging on storefront revenue on that. The sooner we can get IPs done, we can start getting inserted into ASICs. That's the number two category. And of course, we can start monetizing that when we license. But again, back to your direct storefront question, I think the fact that we're taping this out now gives us the ability to start monetizing from a test chips perspective in 2026. And who knows?

Speaker #4: So the sooner we can get an FPGA test chip taped out and manufactured in the hands of people, the sooner we can start engaging on storefront revenue on that.

Speaker #4: The sooner we can get IPs done, the sooner we can start getting inserted into ASICs; that's the number two category. And, of course, we can start monetizing that when we license.

Speaker #4: But again, back to your direct storefront question, I think the fact that we're taping this out now gives us the ability to start monetizing from a test chips perspective in 2026. Who knows, that could lead to even end of year or early 2027 for more volume-oriented device sales on that technology.

Brian Faith: That could lead to even end of year, early 2027, for more volume-oriented device sales on that technology. So I think it's absolutely the right decision that we accelerated that because if you're thinking about, you know, do I do a million or two more revenue this quarter and then forego the chance to get into multi-hundred million dollar markets in the defense area with all this going on and these new systems being deployed, that's the wrong decision for investors. The right decision is to make sure that we have the chips on the table for when these companies are making these decisions on microelectronic components that go into the national defense types of systems that are going to be coming online in the next few years. And that's the bet that we've made. And I think that's absolutely the right bet to do that.

Speaker #4: So, I think it's absolutely the right decision that we accelerated that. Because if you're thinking about, you know, do I do a million or two more in revenue this quarter, and then forgo the chance to get into multi-hundred-million-dollar markets in the defense area with all this going on and these new systems being deployed, that's the wrong decision for investors.

Speaker #4: The right decision is to make sure that we have the chips on the table for when these companies are making decisions on microelectronic components that go into the national defense types of systems that are going to be coming online in the next few years.

Speaker #4: And that's the bet that we've made, and I think that's absolutely the right bet to do.

Speaker #5: How closely are you engaged with these prospective customers that you feel certain enough to make this change in course? And actually do a tapeout? Because over the last few years, you've talked about the benefits of just licensing IP, getting royalties, and then perhaps some limited storefront activity.

Rick Neaton: How closely are you engaged with these prospective customers that you feel certain enough to make this change in course and actually do a tapeout? Because over the last few years, you've talked about the benefits of just licensing IP, getting royalties, and then perhaps some limited storefront activity. So how engaged are you with these people that you made this change of course?

Speaker #5: So how engaged are you with these people that you made this change of course?

Speaker #4: So I'd say, firstly, we've been on the path of doing developments for storefronts for the last several years. IP has obviously been a big part of the business model as well.

Brian Faith: So I'd say, firstly, we've been on the path of doing developments for storefront for the last several years. IP has obviously been a big part of the business model as well. But we had our eye that we wanted to have more products or capability on the storefront side because we know that those drive the top line considerably higher and faster than IP licenses. So having this blended business model was the right model for the company. As you know, since our inception 35 years ago, whatever it is now, defense has always been a big market for QUICKLOGIC, and I've always been very connected to that industry as well, dating back to when we first started here. I'd say in the last few years, the activity has really picked up in that area as far as customer engagements go.

Speaker #4: But we had our eye on having more products or capability on the storefront side because we know that those drive the top line considerably higher and faster than IP licenses.

Speaker #4: So, having this blended business model was the right model for the company. As you know, since our inception 35 years ago, defense has always been a big market for QUICKLOGIC.

Speaker #4: And I've always been very connected to that industry as well, dating back to when I first started here. I'd say in the last few years, the activity has really picked up in that area as far as customer engagements go.

Speaker #4: Some of it is just typical discussions you have with existing customers. Some of it has been accelerated because of the exposure that QUICKLOGIC is getting, from doing work for the government directly now, and also some of the speaking engagements we've been afforded at these big foundry events, like the one with Intel Direct Connect a few months ago.

Brian Faith: Some of it's just typical discussions you have with existing customers. Some of it's been accelerated because of the exposure that QUICKLOGIC is getting from doing work for the government directly now and also some of the speaking engagements we've been afforded at these big foundry events like the one with Intel Direct Connect a few months ago. And I think those discussions have led to much deeper discussions around program needs and architecture needs. And again, just in recent time, you can see that there is a concerted push by our government to have onshore manufactured alternatives to what has historically been an overseas manufactured technology, semiconductors, and more specifically, FPGAs. I can tell you that when it comes to deciding to self-fund a tapeout, we haven't self-funded a tapeout in nearly a decade, no exaggeration. I take that very seriously.

Speaker #4: And I think those discussions have led to much deeper discussions around program needs and architecture needs. Again, just in recent times, you can see that there is a concerted push by our government to have onshore manufactured alternatives to what has historically been overseas manufactured technology.

Speaker #4: Semiconductors, and more specifically FPGAs. I can tell you that when it comes to deciding to self-fund a tapeout, when we haven't self-funded a tapeout in nearly a decade—no exaggeration—I take that very seriously.

Speaker #4: And I am talking directly to these customers to know that there is actually an opportunity to serve them, that we solve a fundamental problem they have budgeted to address.

Brian Faith: And I am talking directly to these customers to know that there is actually an opportunity to serve there, that we solve a problem, a fundamental problem that they have budget to do, and they want to use these parts. And so that's what gave me the confidence and the team the confidence to do that. And I think that also gave the team a lot of motivation, the engineering team in particular, to work nights and weekends to get that tapeout done so that we could intercept the MPW schedule. And kudos to them for doing that because I think they also believe and see the opportunity that's stirring right in front of us. Does that answer your question?

Speaker #4: And they want to use these parts. And so that's what gave me the confidence and the team the confidence to do that. I think that also gave the team a lot of motivation, the engineering team in particular, to work nights and weekends to get that tape-out done so that we could intercept the MPW schedule.

Speaker #4: And kudos to them for doing that, because I think they also believe and see the opportunity that's in front of us. Does that answer your question?

Speaker #5: So you talked about intercepting the schedule. Are you trying to displace an existing vendor, or is this something different?

Rick Neaton: So you talked about intercepting the schedule. Are you trying to displace an existing vendor, or is this something different?

Speaker #4: I would say this is something different, because if you think about certain programs, certain programs are not able to use offshore-manufactured capability.

Brian Faith: I would say this is something different because if you think about certain programs, certain programs are not able to use offshore manufacturing.Capability

Speaker #4: It has to be onshore. And today, there's no production FPGA that's manufactured onshore, not the least of which is it Red Hard or some of these other capabilities that we're talking about.

Brian Faith: has to be onshore. And today, there's no production FPGA that's manufactured onshore. Not the least of which would be, is it RedHard? Is it some of these other capabilities that we're talking about? So we're doing this because we want to be a viable alternative to what people historically do, which is go spend a lot of money doing a custom ASIC. When we have standard products available, that's great because they're available immediately. They don't have to wait for an ASIC design cycle. They don't have to spend a ton of money on NRE to go do an ASIC design from scratch. And if you think about, again, the rate at which things are changing and the government is trying to get the defense industrial base to launch these new systems, their schedules and budgets don't really afford for the, you know, the huge expensive ASICs every time.

Speaker #4: So, we’re doing this because we want to be a viable alternative to what people historically do, which is go spend a lot of money doing a custom ASIC.

Speaker #4: When we have standard products available, that's great because they're available immediately. They don't have to wait for an ASIC design cycle, and they don't have to spend a ton of money on NRE to go do an ASIC design from scratch.

Speaker #4: And if you think about the rate at which things are changing, and the government is trying to get the defense industrial base to launch these new systems, their schedules and budgets don't really afford for the huge, expensive ASICs every time.

Brian Faith: And so in that case, we would actually be an architectural alternative to what has classically just been a full custom ASIC path.

Richard Shannon: Okay, thanks, Brian. Thanks for answering my questions.

Brian Faith: Thanks, Rick.

Richard Shannon: And I'll step out of the, I'll step out of line here.

Brian Faith: Thank you.

Conference Operator: Thank you. As a reminder, to ask a question, press star one on your telephone keypad. Our next question comes from the line of Richard Shannon with Craig Hallam. Please proceed.

Richard Shannon: Well, hi, Brian. Elias, thanks for letting me ask a couple of questions here. Brian, I guess you've made for a very, very interesting call. I had all this prep done, and that's almost all thrown out the door here. Some really interesting stuff going on here. Let me ask you a couple of quick questions here. And one of them, I think the first one here is following up on Rick's question here. And it really goes to whether there's any, and you just explained it, I think, one of your last sentences here about there's no alternatives here, at least existing in the past. So my question to you is, to your knowledge, do you know of anyone else trying to do something similar to this in any way? Could this only be replicated by somebody having embedded FPGA technology, or can it be done some other way?

Brian Faith: I think at the end of the day, if you want custom capability implemented in a microcontroller or a microelectronic device, you can do that as an ASIC, or you can do it in an FPGA. And so do I know of anybody doing an FPGA that's doing what we're doing? I don't think so. There are clearly other FPGAs in the market that are RAD-tolerant, less that are RAD-hard, none that I know of that are strategic RAD-hard, and none that I know of that are on Global Foundry's 12LP. So I think we're pretty well positioned for the capabilities that we have designed into our chip to be very unique and different. And that's what's driving a lot of the interest in the defense industrial base to get their hands on these as soon as we can get them to them.

I think we're pretty well positioned for the capabilities that we have designed into our chip to be very unique and different, and that's what's driving a lot of the interest in the defense industrial base to get their hands on these as soon as we can get them to them.

Richard Shannon: Okay, so the tenor of these conversations leads you to believe strongly that these are, as long as you execute our sole source positions, then.

Okay, so the tenor of these conversations leads you to believe strongly that these are.

Uh, as long as you execute our Soul Source positions, then.

Brian Faith: I would not have authorized this PO if I didn't think that there was a very high degree of confidence in winning actual revenue. And I'm talking about the hundreds of millions of dollars of revenue if I didn't truly believe that this was a differentiated and very good investment for us and our stockholders.

I would not have authorized this P if I didn't think that there was a very high degree.

Um,

of confidence in winning actual revenue. And I'm talking about,

The hundreds of millions of dollars in revenue.

If I didn't truly believe that this was a differentiated and very good investment.

For us and our stockholders.

Richard Shannon: Okay, that's very directly stated. Thanks for that, Brian. Maybe a few other key details on this initiative here. So are all of these opportunities you're going after specifically related to Golden Dome, or are they a little bit more broadly across new defense programs? Just want to be clear since that was.

Okay. That's very directly stated. Thanks for that, Brian. I have a few other key details on this. This, um,

Brian Faith: No, it's part of your remarks. It's much broader than that. We inserted Golden Dome, and that's just because there's been a lot of press about that recently. And I think there's been a lot of meetups, if you will, within industry around Golden Dome and how that could be accelerated. But this is clearly not limited to Golden Dome.

Initiative here. So are all of these um, opportunities are going after specifically related to golden dome, where they're a little bit more broadly um across new defense programs. Just want to be clear. Since that was, no, it's partly remarks.

It's much broader than that. We inserted a golden do in this just because there's been a lot of.

Press about that recently. And I think there's been a lot of.

Meetups, if you will, within the industry around Golden Dome and how that can be accelerated. But this is clearly not limited to Golden Dome.

Richard Shannon: Okay, and are these all RAD-tolerant or RAD-hard?

Okay. And are these all red-tolerant or red-hard?

Brian Faith: Yes. The second you start backing off of RAD-hard, RAD-tolerant, and you're talking about just plain old COTS, no temp, that really opens up a much broader competitive arena. And we're really trying to stay focused in the swim lane where we can be very dominant, very differentiated. And so we are trying to stay focused on RAD-tolerant and RAD-hard. If an engagement leads in a different direction to no temp, COTS parts, you know, fine. We'll talk to anybody that wants to buy our devices, but that's not the main thrust behind this.

Uh, yes.

The second you start backing off of red, hard red tolerant, and you're talking about...

Um, just plain old Cuts middle temp that really opens up a much broader competitive arena. Um, and we're really trying to stay focused in the swim lane where we can be very dominant and very differentiated. And so, we are trying to stay focused on red tolerant and red heart. If an engagement leads in a different direction to Mel temp,

Talk to anybody that wants to buy our devices. But that's not the main thrust behind this.

Richard Shannon: Okay, and then I'm pretty sure I understand this, but I'm asking a very direct question here just to make sure that I do. So all these devices are inherently higher density that you wouldn't expect to be done on other nodes, specifically the RAD-hard you're doing with two other founders you've been working on for a couple of years here. These are not overlapping markets in any way, are they? So this is entirely new. Is that correct?

Okay. And then, um,

I'm pretty sure I understand this, but I'm asking a very direct question here just to make sure that I do. So, all these devices are inherently higher density than you wouldn't expect to be done on other nodes. Specifically, the radar you're doing with two other founders you've been working on for a couple of years here—these are not overlapping markets in any way, are they? So, this is entirely new. Is that correct?

Brian Faith: This is entirely new. This is funded by QUICKLOGIC, completely independent.

this is entirely new, this is

Funded by QuickLogic, completely independent.

Richard Shannon: Okay, but not overlapping in market in any way.

Okay, but not overlapping in Market in any way.

Brian Faith: Not that I am aware of. I mean, there's where you define like what a superset is and a subset is, that's kind of gray, right?

Not that I am aware of. I mean, there's...

Richard Shannon: But I guess my point is it sounds like you're describing this as really high-density stuff on a 12-nanometer node that you wouldn't inherently be able to do on a 90-nanometer node you've been working on with others.

Where you define like what a superset is and a subset is, it's kind of gray, right?

Brian Faith: Oh, yeah, for sure. Yeah, I completely agree with that.

Richard Shannon: Perfect.

Brian Faith: Yes, absolutely. Yep.

Richard Shannon: Okay, perfect. Thanks for that detail. Maybe two last questions, I'll jump out of line here. So it sounds like you're delaying some of the other contracts we've heard for a number of quarters in past calls here. Is there any negative impacts to any of these contracts by delays as you're focusing on this?

But I guess my my point is it sounds like you're you're you're describing this is really high density stuff on a 12 nanometer node that you wouldn't inherently be able to do on a 99 nanometer nodes you've been working on with others. Oh yeah. For sure. Yeah. I completely agree with that. Yeah, absolutely.

Yep. Okay, perfect. Thanks for that detail. Maybe the last two questions. I'll jump out of line here. Um, so it sounds like you're delaying some of the other contracts that we've heard about for a number of quarters in past calls here. Um, is there any negative impact to any of these contracts due to the delays as you're focusing on this?

Brian Faith: No, in fact, the schedules that we're talking about with customers as a result of the the Astralis 2.0 capability being prioritized, we're being very forthright with our customers. There's no issue with that. They're working with us on those deliveries. And there's no material impact at all to things that we have in our contract. It's helping shape how we discuss and negotiate contracts for the ones that aren't won yet. But they're very clear in understanding of what Astralis 2.0 has. And like I was saying in the script, some of these customers that we've been engaged with, their desires from our core have actually expanded.

No, in fact, the schedules that we're talking about with customers as a result of the um.

The Astralis 2.0 capability is being prioritized. We are being very forthright with our customers; there's no issue with that. They're working with us on those deliveries, and there's no material impact at all to things that we have in our contract. It's helping shape.

How we discuss and negotiate contracts for the ones that aren't one yet.

But they're very clear and understanding of what AstroloGy 2.0 has, and like I was saying in the script, some of these.

Some of these customers that we've been engaged with, they're...

Brian Faith: And that's what's driven us to actually accelerate Astralis 2.0 so that not only can we do the core they need, but we can do it and still have this automation that we need so that we can actually handle multiple cores for multiple customers at the same time. We could have gone and prioritized, well, let's just do this one customer for revenue in Q3, and let's push out 2.0. And that's the whole thing I was mentioning earlier, that we could do that, and that's better for Q3 revenue, but it's actually not better for the company because then we're still in the same situation waiting for 2.0. So this is the bite the bullet, get 2.0 out and done so that we can then use that to fan out to these multiple customers that we're talking about, especially the ones that need the higher density.

Their desires from our core have actually expanded.

And that's what's driven us to actually accelerate Astrology 2.0. So that not only can we do the core they need, but we can do it and still have this automation that we need so that we can actually handle multiple cores for multiple customers at the same time.

We could have gone in prioritized. Well, let's just do this: one customer for revenue in Q3, and let's push out 2.0.

And that's the whole thing. I was mentioning earlier that we could do that, and that's better for Q3 revenue, but it's actually not better for the company because then we're still in the same situation waiting for 2.0. So,

Brian Faith: And we are starting to see more of those now. And that density range clearly needs Astralis 2.0. So the sooner we can get that done, the sooner we can start tackling many of these in parallel.

This is the bite, the bullet. Get 2.0 out and done, so that we can then use that to fan out to these multiple customers that we're talking about, especially the ones that need the higher density.

And we are starting to see more of those now. Um, that density range clearly needs a shallow 2.0. So the sooner we can get that done, the sooner we can start tackling many of these in parallel.

Richard Shannon: Okay, I think that makes sense. So I appreciate all the detail. I'm going to get my last question for Elias. So I guess I wanted to maybe try to narrow down a little bit about what you're thinking about for modest decline in revenues and what that can imply for fourth quarter revenues here. And maybe if you care to define or help us think about those numbers, that would be a great help.

Okay.

Uh, I think that makes sense. So I appreciate all the detail. I’ve got my last question for Elias. Um,

So I guess I wanted to to maybe try to narrow down a little bit about what you're thinking about uh for modest decline in revenues and what that can imply it for a fourth quarter of revenues here. Um, maybe if you can if you if you care to define or help us think about those numbers that would be a great help.

Alicia (Conference Operator): Well, if you recall what I said, is that we're expecting a significant uptick starting in Q4. But we're still going to have a down year, a modest down year compared to last year, okay? I don't want to give you a number right now, but you know we're working on it and would like to punt it a bit down the road because I, you know, if I gave you a number, I probably would stick my neck out for it, but I would say, let's just put it this way, I would say it's significant.

if you, if

You recall what I said is that we're expecting a significant uptick.

Starting in Q4.

Uh, but we're still going to have a down year.

Here. Okay.

Um, I don't want to give you a number right now, but you know, we're working on it and would like to, uh,

Uh, I punted a bit down the road because I, you know, I could. If I gave you a number, I probably would stick my neck out for it. But I would say, let's just put it this way: I would say it's significant.

Richard Shannon: Okay, fair enough. So I guess we'll try our best on modeling that. And we'll look forward to a very interesting next few quarters. So thanks for letting me ask questions, guys.

Alicia (Conference Operator): Thanks, Richard.

Okay, uh, fair enough. I guess we'll try our best on modeling that, and we'll look forward to a very interesting quarter. So, thanks for letting me ask questions, guys.

Thanks Richard.

Conference Operator: Thank you. Our next question comes from the line of Gus Richards with Northland Capital Markets. Please proceed.

Thank you.

Our next question comes from the line of Gus Richards with Northland Capital Markets. Please proceed.

Alison Ziegler: Yes, thanks for taking my questions. I just had a couple of questions. The first one is, I've never heard of a chip company monetizing a test chip, and I believe in the script you said that you'd be able to get customers to pay for test chips, and it sounded like you were going to sell multiple test chips. I'm just wondering how that works.

Yes, thanks for taking my questions. I just had a couple of questions. The first one is, I’ve never heard of a chip company monetizing its test chip. I believe in the script you said that you'd be able to get customers to pay for test chips, and it sounded like you were going to sell multiple test chips. I'm just wondering how that works.

Brian Faith: Yeah, definitely. So test chips are our way of proving out IP functionality before we do the production version of that, right? Because it minimizes risk and upfront costs when you do that. But you can definitely sell devices to customers for engineering samples. So test chip and engineering sample could be used interchangeably in this case. But if you're giving a customer access to technology, especially in the markets that we're talking about, and you're doing so in a way that makes it easy for them to use, like on an evaluation card, they're very accustomed to you paying for those and not getting that for free. This is unlike, you know, 10 years ago when we were doing things in more of the consumer market where the Samsungs of the world expect everything for free up until the first volume purchase order.

so,

Test chips are our way of proving out IP functionality before we do the production version of that, right? Because it minimizes risk and upfront costs. When you do that.

Um, but you can definitely sell devices to customers for engineering samples.

So, test ship and engineering sample can be used interchangeably in this case. However, if you're giving a customer access to technology, especially in the markets that we're talking about,

And you're doing so in a way that makes it easy for them to use, like on an evaluation card. They're very accustomed to paying for those and not getting that for free. This is unlike...

You know, ten years ago when we were doing things in more of the consumer market, where...

Brian Faith: This is a very different market that we're talking about with aerospace and defense. And so I think they're accustomed to paying for that. And we're expecting that we will be paying for that. They will be paying for it, excuse me.

The Samsungs of the world expect everything for free up until the first billion purchase order. Um, this is a very different market that we're talking about with aerospace and defense, and I think they are accustomed to paying for that. We're expecting that we will be paying for that.

They will be paying for it. Excuse me.

Alison Ziegler: So the test chip, if I've got this right, and you say it's interchangeable with an engineering sample, so this is a fully functional, you know, standalone FPGA test chip. Is that the way to think about it?

So the the tests get the if I've got this right and and you say it's um it's interchangeable with an engineering sample. So this is a, a fully functional.

Brian Faith: That is the way to think about it. That's right. We've designed it so that our customers can take their IP, their RTL, and run it in the FPGA in that test chip.

You know, standalone FPGA test chip, is that the way to think about it?

That is the way to think about it. That's right.

Okay, we've designed this so that our customers can take their IP, their RTL, and run it in the FPGA in that test chip.

Alison Ziegler: I see. So it would go along with a demo board or what have you.

Brian Faith: Yeah, they would get some sort of an evaluation board, and then the FPGA user tools, the Aurora tools that we provide for them to run their designs through and create a bitstream.

I see, so it would go along with the demo board or what have you.

Yeah, they would get some sort of evaluation board and then the FPGA user tools, the Aurora tools that we provide for them to run their designs through and create a bitstream.

Alison Ziegler: Got it. And could this test chip be turned into a standard product, or would there be more engineering required before that would happen?

Got it. And could this test chip be turned into a standard product, or would there be more engineering required before that would happen?

Brian Faith: That's a million-dollar question, actually, because if these customer evaluations prove out to be fruitful in the sense that they can run their RTL and not many changes are needed, then it's simply production mass, call, go, meaning very minor changes. If through that cycle of learning with the customers using the evaluation tools, it shows that we need to, I'm just using examples here, make it bigger or make it smaller or make it add a different interface to it, then those are all things that are typically very feasible, but they would impact scheduling costs on the development side.

That's a million-dollar question, actually, because if these customer evaluations proved out to be.

Um, fruitful in the sense that they can run their RCL, and not many changes are needed. Then it's simply...

Brian Faith: So that's really, I think, why we want to get this test chip out into the hands of the defense industrial base because there's no substitute for them using the part, touching and feeling it, and running it through the software so that they know, does it work as is or does it need some modification to that? That's the kind of engagement that you can actually have when we get test chips in their hands, which is, again, why we went through this really diligent decision in trying to say, yeah, we're going to go accelerate this because we want that feedback. We want to know if this thing can work. And if we can generate revenue next year, like starting production revenue by the end of the year, depending on the nature of the changes required.

Production masks, call it a go, um, meaning very minor changes if through that cycle of learning with the customers, using the evaluation tool that shows that we need to. I'm just using examples here, make it bigger, or make it smaller, or add a different interface to it. Those are all things that are typically very feasible, but they would impact scheduling and the cost on the development side. So, that's really, I think, why we want to get this test ship out into the hands of the defense industrial base because there's no substitute for them using the.

Part touching and feeling it and running it through the software so that they know.

Does it work as is, or does it need some modification?

Um, that's the kind of engagement that you can actually have when we get test ships in their hands, which is again why we went through this, uh, this.

Really diligent decision in trying to say, yeah, we're going to accelerate this because we want that feedback. We want to know if this thing can work and if we can generate revenue next year, like starting production revenue by the end of the year, depending on the nature of the changes required.

Alison Ziegler: And is this going to go through on a hot lot? Or is it a multi-project wafer? You know, sort of what's the mechanism through global?

It and is this going to go through on a hot lot? Are you, is it a multi-project wafer, you know, sort of what's the mechanism through global?

Brian Faith: I'm going to give a little bit more detail, and then if we go deeper, I'll probably say I'm not going to go there. But I'll say most, more often than not, companies do NPWs because that that actually minimizes the cost of the test chip. And that was actually one of the reasons why, when we decided to do this, we basically were on the clock to get it done and submitted because there is an NPW that we wanted to intercept. And NPWs are like the shinkansen in Japan. If you're a minute late, you miss the boat or miss the train. And so we really had to scramble, and our engineering team did an amazing job to get everything submitted on time so that we could be on that NPW train. So short answer, NPW. Hopefully, that's sufficient for your question.

I'm going to get a little bit more detail, and then if we go deeper, I'll probably say I'm not going to go there. Um, but I'll say most more often than not, companies do NPWs.

um, because that

That actually minimizes the cost of the test strip, and that was actually one of the reasons why, when we decided to do this.

We basically were on the clock to get it done and submitted because there is an NPW that we wanted to intercept, and MPW is like the Shinkansen in Japan. If you're a minute late, you missed the boat.

Um, or miss the train. And so, we really had to scramble, and our engineering team did an amazing job to get everything submitted on time, so that we could be on that MPW train. So, short answer: MPW.

um,

Alison Ziegler: Yeah, and then you would have to run, if this was a successful chip, you'd have to run more full wafers in order to get samples to customers.

Hopefully, that's sufficient for your question.

Yeah, and then you would have to run if this was a successful chip, you'd have to run more more full wafers in order to get samples to customers.

Brian Faith: And that's a great problem to have. Global's a fantastic foundry, and I have no doubts that they could handle that if we need it.

And that's a great problem to have. Global's a fantastic founder, and I have no doubts that they could handle that if we need it.

Alison Ziegler: Okay, and at the risk of boring everybody, shifting over to the software side, it sounds like you have been using your engineers that work on the design software to help customers design products in your FPGAs, and you're taking those customers out of customer support and moving them into product development. And is that the way to think about it?

Okay. And at the risk of boring everybody, um, shifting over to the software side, it sounds like you have been using your ...

Uh, engineers that work on the design software to help customers design.

Our FBGA, and you're taking those customers out of customer support and moving them into product development. Is that the way to think about it?

Brian Faith: We have different disciplines within engineering. Some people tend to be more customer-focused and some are more internally focused. There are some resources that can cross over those domains and do both. And I would say that anybody that could help with getting this tape-out done helped without impacting customer-related programs. So we did do a lot of resource shuffling to make that happen.

Um, we have different disciplines within engineering. Some people tend to be more customer-focused, and some are more internally focused. Um, there are some resources that can cross over those domains and do both.

And I would say that.

Anybody that could help with getting this tape out, done helped, um, without.

Without impacting customer-related programs, we did a lot of resource shuffling to make that happen.

Alison Ziegler: Yeah, I was referring to the software side, your design software. It sounded like a customer's project was delayed for revenue in Q3 because you're working on your design software.

Yeah, I was referring to the software side, this, um, your design software.

Um, it sounded like a customer's project was delayed for revenue exposure in Q3 because.

Brian Faith: Oh, that's Astralis. So Astralis is the IP generator tool. Astralis 2.0 needed to go through several feature enhancements to meet the needs of what I was just talking about earlier. And we were basically trying to pull that in and accelerate that. And we're still working on that because we said 2.0 will be available in Q4. And so there are as many resources that we have that are capable of helping with Astralis 2.0 or doing that because we want to get that done and ready in Q4. We don't give Astralis to our customers. Our IP engineers use Astralis to create IP for customers.

You're working on your design software. Uh, that's Astralis. So, Astralis is the AI generator to it?

Um, Astralis 2.0 needed to go through.

um,

Several feature enhancements to meet the needs of what I was just talking about earlier. We are basically trying to pull that in and accelerate that, and we're still working on that because we've set 2.0 to be available in Q4.

And so there are as many resources that we have that are capable of helping with a strong 2.0 or doing that, because we want to get that done and ready in Q4. We don't give Arralis to our customers. Our IP engineers use Astralis to create IP for customers.

Alison Ziegler: Oh, okay. I understand. But you want that to intersect the test chip in Q4?

Oh, okay. Uh, I understand, um, but you want that to intersect, um, the test chip in Q4.

Brian Faith: No, that's completely different. Astralis 2.0 is for our IP licensing. It is not related to the tape-out that we just did.

No, that's completely different. Astrology is for our IP licensing. Um, it is not related to the, uh, the tape-out that we just did.

Alison Ziegler: Okay, got it. All right. Thank you so much.

Okay. Got it. All right, thank you so much.

Brian Faith: Thank you. Thanks, Gus.

Thank you. Thanks guys.

Conference Operator: Thank you. Our next question comes from the line of Richard Shannon with Craig Hallam. Please proceed.

Thank you. Our next question comes from the line of Richard Shannon with Craig Hallum. Please proceed.

Richard Shannon: Hey, Brian. Just one follow-on question for me. So you talk about this great deal of interest from various defense programs, and specifically the need for onshore manufacturing. You know, obviously, you're talking about RedHard, RedHard RAD tolerance on a 12-nanometer node. Does this enthusiasm and acceleration of timeframes, are you also seeing this in your strategic RedHard on the other two foundries you've talked about working with for the last couple of years?

Hey Brian, I just want to follow up on a question for me. Um, so you talk about this great deal of interest from various defense programs.

Uh, it's basically a need for onshore manufacturing.

You know, obviously talking about radar red tolerance on a 12-nanometer node. Um, does this enthusiasm and acceleration of time frames, um, are you all seeing this in your strategic rad hard, on the other two founders you've talked about working with for the last couple of years?

Brian Faith: We are definitely seeing interest on the DIB on those. I'm not going to be able to go into more detail because that's the government contract, and I'm not allowed. You and I've asked again for permission to talk about it in more detail, but not been granted yet. So I can't really go into more detail. But we are still seeing interest for that as well from an end customer perspective.

We are definitely seeing interest in the div on those. Um,

I'm not going to be able to go into more detail because that's.

That's the government contract tonight. I'm not allowed, even though I've...

Asked again for permission to talk about it in more detail, but not been granted that, so I can't really go into more detail. However, we are still seeing interest for that as well.

From an End customer perspective.

Richard Shannon: Okay, fair enough. That's all from you guys. Thank you.

Okay, fair enough. That's all from you guys. Thank you.

Brian Faith: Thanks, Richard.

Thanks for

Conference Operator: Thank you. There are no further questions at this time. I'd like to pass the call back over to Brian for any closing remarks.

Thank you. There are no further questions at this time. I'd like to pass this call back over to Brian for any closing remarks.

Brian Faith: Thank you. Before we conclude, I wanted to share a few upcoming opportunities to connect. On the investor side, we'll be at the sixth annual Needham Virtual Semiconductor and Semicap one-on-one conference on August 21st and in New York on September 4th for the TD Securities Technology Growth Cap Summit. We'll also be showcasing QUICKLOGIC at key industry events, starting with the Global Foundries Technology Summit in Santa Clara at the end of August, then in Munich in October, and finally, Embedded World North America in Anaheim this November. Thank you once again to our shareholders, analysts, and the broader investment community for your continued interest and support. We value your confidence in QUICKLOGIC and look forward to updating you on our progress in the quarters ahead. Thank you and goodbye.

Thank you. Um,

Before we conclude, I wanted to share a few upcoming opportunities to connect on the investor side. We'll be at the 6th Annual Meet and Virtual Semiconductor and Semi 1-on-1 Conference on August 21st, and in New York on September 4th for the TD Securities Technology Growth Caps Summit. We'll also be showcasing QuickLogic at key industry events, starting with the GlobalFoundries Technology Summit in Santa Clara at the end of August, then in Munich in October, and finally at Embedded World North America.

Behind this November.

Thank you once again to our shareholders, analysts, and the broader investment community for your continued interest and support. We value your confidence in QuickLogic and look forward to updating you on our progress in the quarters ahead. Thank you and goodbye.

Conference Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your pleasure.

Includes today's teleconference. You may disconnect your lines at this time.

The patient.

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