QuickLogic CEO Discusses Q4 2010 Results - Earnings Call Transcript

QuickLogic Corporation ( QUIK)

Q4 2010 Earnings Call

February 8, 2011 5:30 p.m. ET

Executives

Andy Pease – President and CEO

Ralph Marimon – VP, Finance and CFO

Thomas Hart – Executive Chairman

Analysts

Harsh Kumar – Morgan Keegan

Conor Irvine – Needham & Company

Edwin Mok – Needham & Company

Brian Coleman – Hawk Hill Asset Management

Hamed Khorsand – BWS Financial

Bob West – NI Technical Research

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the QuickLogic Corporation’s Fourth Quarter and Fiscal Year 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 on how to participate will be given at that time.

(Operator Instructions). And as a reminder, today’s call is being recorded.

I would now like to introduce your host for today’s conference, Mr. Andy Pease, President and CEO. Mr. Pease, you may begin.

Andy Pease – President

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

Joining me here today is our Executive Chairman, Tom Hart, and our CFO, Ralph Marimon. Ralph will take you through our fourth quarter results then I will share my perspective on our business. Following this, Ralph will detail our guidance for the first quarter of 2011, and then we’ll take your questions. Ralph?

Ralph Marimon

Thank you, Andy. First, let me 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, the impact of inventory rebalancing in the channel, 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 fourth quarter of 2010, total revenue is 7 million. Although total revenue was within our guidance range, this does represent a sequential decline of approximately 5%. New product revenue totaled 2.3 million which represented a 19% sequential decrease. New product revenue is impacted by much lower bookings than we anticipated due to the inventory rebalancing and the wireless broadband data card channel.

The Tier product revenue on the quarter totaled 4.7 million which was at 3% sequential increase. Our non-GAAP gross profit margin for Q4 was 68% and was above our guidance due to the mix of product shipped.

Non-GAAP operating expenses for Q4 totaled 4.2 million, which was within our guidance. As forecasted, non-GAAP operating expenses increased compared to Q3 primarily due to an increase in expenses for a new platform development.

On a non-GAAP basis, other income and expenses and taxes for Q4 were net positive totalling approximately 10,000, primarily due to income tax benefits related to our overseas operations. This resulted in a non-GAAP net income of 496,000 or $0.01 per diluted share.

Our net ending cash position of 22 million reflects an increase of approximately 4.8 million from the Q3 net ending cash balance. This increase was driven primarily by the exercise of warrants, the exercise on employee stock options, and cash generated by operations.

Our Q4 GAAP net loss was 69,000 or $0.00 per diluted share. Our GAAP results include stock-based compensation charges of 565,000. Please see today’s press release for a detailed reconciliation of our GAAP to non-GAAP result as well as for detailed information on full-year 2010 results.

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

Andy Pease

Thank you, Ralph. We are very pleased with the solid tangible progress we posted for 2010. Our total revenue increased 74% and our new product revenue increased 93% over 2009. As a result of this growth and the success of our improved operating model, we reported a non-GAAP profit for each of the last three quarters as well as for the full-year of 2010.

This, along with the exercise of warrants and options, helped boost our balance sheet net cash from 16 million at the close of 2009 to 22 million at the close of 2010. While revenue describes the depths of our business, our balance sheet, the strength of our foundation, we believe it is also important to track and measure the breadth of our business which includes the number of active designs, customers and market segments.

During 2010, we shipped 19 active production designs, more than three times the six active designs we had at the close of 2009. We also doubled our active customer base from 6 to 12.

An important implication is we have increased the average number of designs for customer from one at the close of 2009, to 1.5 at the close of 2010. This indicates once a customer uses a CSSP in one design, there is a tendency to use our CSSP solutions in future designs.

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