QuickLogic Corporation ( QUIK)

Q3 2010 Earnings Call Transcript

November 2, 2010 5:30 pm ET


Thomas Hart – Chairman and CEO

Andy Pease – President

Ralph Marimon – VP, Finance and CFO


Edwin Mok – Needham & Company

Brian Coleman – Hawk Hill Asset Management

Robert West [ph] – NI Technical Research [ph]



Good day, ladies and gentlemen, and welcome to the QuickLogic Corporation third 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, Chairman and CEO, Mr. Thomas Hart. Sir, you may begin.

Thomas Hart

Good afternoon, ladies and gentlemen, and thank you for joining us today for QuickLogic’s third quarter 2010 earnings conference call.

Joining me here today is our President, Andy Pease, and our CFO, Ralph Marimon. Ralph will take you through our third quarter results, and then I’ll share my perspective on our business. Following this, Ralph will detail our guidance for the fourth quarter of 2010, and then we’ll take your questions. Ralph?

Ralph Marimon

Thank you, Tom. I’ll take a moment to read our 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 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 third quarter of 2010, total revenue was 7.3 million. This represents a sequential increase of 13% and was within our guidance range. New product revenue grew to 2.8 million, representing a 20% sequential increase. Legacy product revenue totaled 4.6 million, which was a 9% sequential increase. Both product lines were within our guidance range.

Our non-GAAP gross profit margin for Q3 was 64.5%, and was above our guidance due to the mix of product shipped. Non-GAAP operating expenses for Q3 totaled 3.8 million, which was at the low-end of our guidance. These lower expenses, combined with higher than planned gross margin produced a non-GAAP operating profit of 921,000.

Non-GAAP operating expenses increased compared to Q2, primarily due to an increase in third-party engineering expenses and a modest increase in SG&A. On a non-GAAP basis, tax and other expenses totaled approximately 4,000. This resulted in a non-GAAP net profit of 917,000 or $0.02 per diluted share, compared with a net profit of 418,000 or $0.01 per diluted share in the second quarter of 2010.

Our ending cash position of 19.2 million reflects an increase of approximately 1.3 million from the Q2 ending balance. This increase was driven by our higher than expected gross margin, lower than expected operating expenses and the exercise of warrants from our November 2009 Registered Direct offering. Why investors from our November offering exercised (inaudible) provided cash to the company of approximately 556,000.

Our Q3 GAAP net profit was 550,000 or $0.01 per diluted share. Our GAAP results include stock-based compensation charges of 568,000, which was partially offset by a one-time tax benefit of 209,000 related to our investment in TowerJazz shares. Because of our GAAP profit, shares outstanding are now calculated on a fully diluted basis. Weighted average fully diluted shares outstanding at the end of Q3 totaled 38.7 million shares. Please see today’s press release for a detailed reconciliation of our GAAP to non-GAAP results.

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

Thomas Hart

Yeah. Thanks, Ralph. Well, by every measure, it’s been a year of tremendous progress here at QuickLogic. Q3 2010 total revenue was up 13% sequentially and 120% year-over-year. With this growth, we’ve returned to GAAP profitability, positive cash flow and exited the quarter with 19.2 million in cash.

In addition to these tangible accomplishments, we’ve made significant strategic progress with our customer-specific standard products or CSSPs that we believe will fuel our growth and profitability during the coming year. I’ll cover this progress in a few minutes, but first, let’s take time to evaluate our near term industry events are impacting QuickLogic.

As you’ve undoubtedly heard from many semiconductor companies that have already reported calendar Q3 results, short-term visibility has been reduced and in many cases, there is some degree if inventory rebalancing expected to occur during Q4. Because we’ve been able to maintain short and dependable lead times for our legacy products throughout 2010, we’re not anticipating any material impact from inventory rebalancing. Even though Q4 is normally a seasonally soft quarter for the industry sectors we serve with our legacy products, we expect sales for these products to be flat to Q3. We’re also forecasting flat new product revenue in Q4.

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