QuickLogic Corporation ( QUIK )

Q1 2010 Earnings Call Transcript

May 6, 2010 5:30 pm ET

Executives

Thomas Hart – Chairman & CEO

Ralph Marimon – VP of Finance & CFO

Andy Pease – President

Analysts

Edwin Mok – Needham & Company

Bob West [ph] – Anaheim Technical Research [ph]

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the QuickLogic Corporation’s first quarter 2010 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator instructions) As a reminder this is program is being recorded. I would now like to introduce your host for today’s program, Mr. Thomas Hart; CEO. Please go ahead, sir.

Thomas Hart

Yes, good afternoon, ladies and gentlemen, and thank you for joining us today for QuickLogic’s first quarter 2010 conference call. Joining me here today is our President, Andy Pease, and our CFO, Ralph Marimon.

Ralph will take you through our first quarter results and then I’ll share my perspective on our business. Following this, Ralph will detail our guidance for the second quarter of 2010 and then we’ll take questions. Ralph?

Ralph Marimon

Thank you, Tom. I’ll take a moment to read a Safe Harbor statement. During this call we will make statements that are forward-looking. These forward-looking statements involve risks and uncertainties including, but not limited to, our stated expectations relating to revenue growth from our new products, statements pertaining to our design activity, and our ability to convert new design opportunities into customer activity, market acceptance of our customers’ products, our expected results, and our financial expectations for revenue, gross margin, operating expenses, profitability, and cash.

QuickLogic’s future results could differ materially from the results described in these forward-looking statements. We refer you to the risk factors listed in our Annual Report on Form 10-K, quarterly reports on Form 10-Q, and prior press releases for a description of these and other risk factors.

QuickLogic assumes no obligation to update any such forward-looking statements. For your information, this conference call is open to all and is being webcast live.

For the first quarter of 2010, total revenue was $5.4 million. This represents a sequential increase of 27% and was at the high end of our guidance range. New product revenue was $2.1 million. This represents a modest sequential increase and was within our guidance range.

Due to the fact our new product revenue is generated by only a few customers during Q1 who were themselves launching new products, scheduling volatility was high and push-outs and pull-ins were not fully offsetting. As Tom will cover in a moment, we are forecasting a significant expansion in a number of our customers in production in Q2 and we believe this will improve the predictability of forecasting as well as the linearity of our anticipated forward growth.

Q1 legacy product revenue was $3.3 million. This represents a sequential increase of 50% and was above the high end of our guidance. We saw an increase in demand for our legacy products from multiple customers during the quarter.

Our non-GAAP gross profit margin for Q1 was 62%, which was above our guidance. The higher gross margin was driven by the higher-than-expected revenue on our legacy products as well as improved operating efficiency due to the higher revenue level.

Non-GAAP operating expenses for Q1 totaled $3.8 million. Expenses continue to be favorably influenced by the variable cost model implemented during 2008 and the cash conservation plan put in place during the second half of 2009, and continued into the first half of 2010. As I stated during our Q4 call, we continue to complement our internal fixed design capability with external resources that allow us to tap into the best design resources in the world and treat them as variable cost. As evidenced by the number of designs we have flowing [ph] under production and our design funnel activity, these resources have allowed us to quickly and efficiently engage a wide variety of opportunities with multiple customers.

On a non-GAAP basis, tax and other expenses totaled $54,000. These consisted primarily of interest charges, foreign exchange losses, and taxes incurred on our foreign operations. Our non-GAAP net loss was $484,000 or $0.01 per share compared with a net loss of $1.3 million, or $0.04 a share in the fourth quarter of 2009.

Our ending cash position of $18.3 million reflects an increase of approximately $100,000 from the Q4 ending balance. Our cash usage of $1 million during the quarter was offset by the sale of $700,000 shares of TowerJazz Semiconductor holding, which resulted in proceeds of approximately $1.1 million.

While we are optimistic about what the future will hold for TowerJazz, after carefully evaluating our position and considering the very sharp rise in the price of TowerJazz stock, we decided it will be prudent to reduce our risk exposure by selling roughly half our position. As it stands today, we still hold 644,000 shares of TowerJazz, which, at the end of Q1 were valued on our balance sheet as a current asset at $1.1 million.

Our first quarter GAAP net loss was $143,000 or zero cents per share. Our GAAP results include the gain from the sale of TowerJazz shares of 993,000, which was partially offset by the stock-based compensation charges of $652,000. Please see today’s press release for a detailed reconciliation of our GAAP to non-GAAP result.

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