QuickLogic Corporation ( QUIK)

Q1 2011 Earnings Call

May 3, 2011 5:30 a.m. ET


Ralph Marimon – VP, Finance and CFO

Andy Pease – President and CEO

Thomas Hart – Executive Chairman


Jason Rochelle [ph] – Needham and Company

Brian Coleman – Hawk Hill Asset Management

Hamed Khorsand – BWS Financial

Robert West – NI Technical Research



Good day, Ladies and Gentlemen, and welcome to today’s QuickLogic Corporation first quarter 2011 earnings call. (Operator Instructions).

I would now like to introduce your host for today’s conference, Mr. Andy Pease, CEO of QuickLogic and Ralph Marimon, CFO of QuickLogic. Mr. Marimon, you may begin.

Ralph Marimon

Thank you and good afternoon.

Before we get started, 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, statements pertaining to our design activity and our ability to convert new design opportunities into customer activity, market acceptance of our customer 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 2011, total revenue was $5.5 million. As we previously announced, this revenue was below our guidance and represents a sequential decline of approximately 20%.

New product revenue totaled $1.2 million, which represented a 46% sequential decrease. New product revenue was negatively impacted by reduced demand from our broadband data card customers and a non-QuickLogic technical issue that’s halted shipments to our secure banking customer. Andy will address both of these situations in detail in his prepared comments.

Mature product revenue in the quarter totaled $4.3 million, which was an 8% sequential decrease and was due to slightly lower bookings during the quarter.

Our non-GAAP gross profit margin for Q1 was 66% and was above our guidance due to the mix of products shipped. Non-GAAP operating expenses for Q1 total 4 million, which was at the low end of our guidance. Non-GAAP operating expenses declined slightly compared to Q4 primarily due to the timing of expenses related to our new product developments efforts.

On a non-GAAP basis, other income and expenses and taxes for Q1 totaled approximately $76,000, primarily due to income tax expenses related to our overseas operations. This resulted in a non-GAAP loss of 435,000 or $0.01 per share.

Our cash usage for the quarter was 858,000. However, due to the exercise of options, our cash position increased by 542, 000 to close the quarter at 22.5 million.

While accounts receivable decreased during the quarter due to the reduced revenue level, DSOs increased primarily due to the timing of certain collections. During the first week of April, we collected approximately $400,000, which had previously been expected to be collected in Q1.

Inventory has increased substantially over the last two quarters primarily due to an increased in PolarPro II inventory. This increase was driven by lower shipment volumes than expected, and the need to support the very short lead time service providers are giving to our broadband data card customers. We currently expect to use this inventory as we go forward and are monitoring it carefully.

Our Q1 GAAP net loss was 878,000 or $0.02 per share. Our GAAP results included stock-based compensation charges of 443,000.

Please see today’s press release for a detailed reconciliation of our GAAP to non-GAAP results.

Now I’ll turn it over to Andy who will update you on the status of our strategic efforts.

Andy Pease

Thank you for joining us this afternoon.

To say I am disappointed in our first quarter results is an understatement. However, I must underscore that while I am disappointed, I am not discouraged.

On the Monday following the release of our preliminary Q1 results, I left for what was literally a trip around the world. It started in China where Brian Faith, QuickLogic’s new VP of Sales and Marketing and I called on existing and potential Tier 1 customers. From there, Brian went to Taiwan and South Korea and I went to Europe. Our goals were to audit our current position with customers, prioritize our near-term efforts, and move our best strategic opportunities forward.

Today, I’ll share the results of our audit, what we see as our near-term priorities, and the status of our tactical and strategic objectives. Following this and Ralph’s presentation of our Q2 guidance, we will welcome your questions.

In our preliminary Q1 announcement, we noted that shortfalls in our wireless data card market were responsible for roughly 60% of our new product revenue shortfall. Our forecast for wireless data card revenue was based on forecasts from our customers and our Silicon partner, Icera.

As recently as the first week of February, the alignment of these two data points gave us confidence in the guidance we presented. However, as we moved through the month of March, it became apparent that the dynamics of the wireless data card market were changing significantly. To clarify what changed and how it impacted us, I’m going to divide the market into two pieces; material markets, which were dominated by North American, Western Europe and emerging markets.

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