QuickLogic Corporation (QUIK)

Q2 2010 Earnings Call Transcript

August 3, 2010 5:30 pm ET

Executives

Tom Hart – President and CEO

Ralph Marimon – VP of Finance and CFO

Andrew Pease – President

Analysts

Edwin Mok – Needham & Company

Brian Coleman – Hawk Hill asset management

Bob West – Nitech Research [ph]

Presentation

Operator

Good day, ladies and gentlemen and welcome to your QuickLogic second quarter 2010 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator instructions) As a reminder, today's call is being recorded.

At this time, I would now like to turn the conference over to your host, the Chairman and Chief Executive Officer, Mr. Tom Hart. Sir, you may begin.

Tom Hart

Thank you, Joe. Good afternoon, ladies and gentlemen, and thank you for joining us today for QuickLogic's second quarter 2010 conference call. Joining me here today is our President, Andrew Pease and our CFO, Ralph Marimon. Ralph will take you through our second quarter results, and then I'll share my perspective on our business. Following this, Ralph will detail our guidance for the third quarter of 2010, and then we will take questions. Ralph?

Ralph Marimon

Thank you, Tom. I'll take a moment to read the 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 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 customer's 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 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 second quarter 2010, total revenue was 6.5 million; this represents a sequential increase of 19% and was at the high end of our guidance range. New product revenue was 2.3 million; this represents a sequential increase of 11% and was within the lower half of our guidance range. During Q2, there were capacity constraints with our packaging, tests and assembly subcontractor. If we had enabled to obtain timely deliveries, we would have reported new product revenue at the midpoint of our guidance.

The good news is that these delays didn't impact our customers and the 200,000 we would have shipped in Q2 will be reported in Q3 in addition to the new product revenue growth forecast I'll share with you in a few minutes.

Our second quarter legacy product revenue was 4.2 million. This represents a sequential increase of 25% and was above the high end of our guidance. As we experienced in Q1, we saw an increase in demand for our legacy products for multiple customers during the quarter.

Our non-GAAP gross profit margin for Q2 was 61%, due primarily to the higher mix of legacy product sales; this was above the midpoint of our guidance. Non-GAAP operating expenses for Q2 totaled 3.5 million. This was better than our guidance of approximately 4 .1 million and when combined with the higher than expected gross profit margin and higher than expected total revenue produced a non-GAAP operating profit of 508,000.

Non-GAAP operating expenses declined versus Q1 due to a decrease in engineering expenses, which was partially offset by an increase in SG&A. The decline in engineering expenses was primarily due to a reduced level of third-party chip design costs. We expect these expenses to increase during the third quarter.

On a non-GAAP basis, tax and other expenses totaled approximately 90,000. This resulted in a non-GAAP net profit of 418,000 or $0.01 per share compared with a net loss of 484,000 or $0.01 per share in the first quarter of 2010. Our ending cash position of 17.8 million reflects a decrease of approximately 473,000 from the Q1 ending balance. Cash usage benefited from higher than expected total revenue, gross margins and lower than expected operating expenses.

Our Q2 a GAAP net loss was 215,000 or $0.01 per share. Our GAAP results include stock-based compensation charges of 633,000. Please see today's press release for detailed reconciliation of our GAAP to non-GAAP results.

I'll rejoin you in a few minutes to discuss our guidance for the third quarter, but first Tom will update you on the status of our strategic efforts.

Tom Hart

Thank you, Ralph. It's been a year of tremendous progress for QuickLogic. I'm extremely pleased with the traction we've developed and the fact that we reported non-GAAP profitability. These are early milestones in what we believe will be our future of sustained revenue growth and profit improvement.

As Ralph noted, constraints in our assembly, package and test subcontractor caused us to miss shipping roughly $200,000 of new products during Q2. Working closely with our customers, our subcontractor and our channel partners, we were able to prioritize product shipments so that none of our customers were negatively affected by CSSP shortages.

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