QuickLogic CEO Discusses Q2 2011 Results - Earnings Call Transcript

QuickLogic Corporation ( QUIK)

Q2 2011 Earnings Call

August 2, 2011 5:30 pm ET


Andy Pease - CEO

Ralph Marimon - CFO


Jason Rechel - Needham & Company

Brian Coleman - Hawk Hill Asset Management

Hamed Khorsand - BWS Financial

Bob West - NI Technology Research



Good day, ladies and gentlemen, and welcome to the QuickLogic second quarter 2011 earnings conference call. (Operator Instructions) Your hosts for today's conference are Andy Pease, CEO; and Ralph Marimon, CFO. It is now my pleasure to turn the conference to Ralph Marimon.

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 and mature 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. This conference call is open to all and is being webcast live.

For the second quarter of 2011, total revenue was $5.7 million, which was $200,000 above the midpoint of our guidance of $5.5 million. New product revenue totaled $1.2 million, which was flat from Q1 and aligned with the midpoint of our guidance. Our investors should note that while we are pleased about the release of the Pantech's Vega 5 Tablet-Phone, we face challenges in other segments that will affect new product revenue in the third quarter. Andy will discuss this in more detail during his remarks.

Mature product revenue in the quarter totaled $4.5 million, which represents a 5% sequential increase over Q1. Our non-GAAP gross profit margin for Q2 was 66% and was above our guidance due to the mix of products shipped. Non-GAAP operating expenses for Q2 total $5.5 million, which was $1.1 million above our guidance.

The increase in operating expenses was due to the timing of two significant engineering expenses from our third party developers. As we have discussed, we are working on multiple platform development efforts this year and we rely on third parties to provide key elements for these platforms. The higher expenses we incurred in the second quarter included the early delivery of an IP block for a next-generation product, which had been expected in early Q3 of this year.

In addition we incurred higher than expected expenses on development work being done on a previously discussed ArticLink II CX solution platform family. Our other income in the second quarter totaled $24,000. Our total non-GAAP loss for the quarter was $1.6 million or $0.04 per share.

Our cash usage for the quarter was $1.1 million, which was just above our guidance of $1 million. Cash usage was slightly higher than expected due to the higher loss that was partially offset by an 11 day decrease in DSOs to 50 days in the second quarter.

Our Q2 GAAP net loss was $2.1 million or $0.05 per share. Our GAAP results include stock-based compensation charges of $436,000. 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. Following this, I'll rejoin the call to present our Q3 guidance.

Andy Pease

Thank you for joining us this afternoon. Given the press release issued last week, the first thing you probably want to hear about today is our new design with Pantech. The Vega 5 is a high-end multimedia computing and communications device that Pantech classifies as a Tablet-Phone. This classification is due to the fact that while it is designed to fit in your pocket, it incorporates a 5-inch display.

When you look at the specifications, you will see Pantech did not compromise on the design of the Vega 5. The Vega 5 uses a Qualcomm 1.5 gigahertz dual-core Snapdragon processor with 1 gigabyte of DRAM memory. It incorporates an 8 mega pixel rear-facing camera and a 1.3 mega pixel front-facing camera to support video chat. And it supports full high definition 1080p video playback and recording. These features make it an ideal phone for consumers, who are interested in high-resolution multimedia, web browsing and gaming applications.

Pantech chose our ArticLink II VX CSSP, which includes VEE and DPO. These technologies significantly improve the consumer viewing experience, including viewing experience while in bright sunlight conditions. And increase the battery life by an impressive 15% during high resolution video chat, video playback, net browsing and gaming use cases.

The Vega 5 is clearly a leading-edge design with specifications that would impress even the most critical geek. What impresses me the most is the care that Pantech took to address the subject of human design elements, particularly as it pertained to minimizing weight and optimizing feel.

QuickLogic's DPO technology enabled Pantech to minimize weight through the use of a smaller battery, while still delivering impressive battery life. If you are interested in learning more about the Vega 5 and how it compares with other high-end Smartphones, please keep an eye on our QuickLogic blog.

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