QuickLogic Corporation — Q1 2018 Form 10-Q
Business and period: QuickLogic designs low-power semiconductor solutions, programmable logic, embedded software and eFPGA intellectual property for mobile, wearable and IoT applications. This unaudited report covers the three months ended April 1, 2018; the comparable period ended April 2, 2017. Amounts below are in U.S. dollars unless stated otherwise.
Financial results and position
| Metric | Q1 2018 | Q1 2017 / prior date |
|---|---|---|
| Revenue | $2.764 million | $3.170 million; down 13% |
| Gross profit / margin | $1.389 million / 50% | $1.373 million / 43% |
| Operating expenses | $5.260 million | $4.841 million |
| Operating loss | $3.871 million | $3.468 million |
| Net loss / diluted loss per share | $3.970 million / $0.05 | $3.565 million / $0.05 |
| Operating cash flow | $(3.754) million | $(3.866) million |
| Cash and cash equivalents | $12.561 million | $16.527 million at Dec. 31, 2017 |
| Revolving credit / capital leases | $6.000 million / $0.531 million | $6.000 million / $0.654 million at Dec. 31, 2017 |
Investing cash outflow was $48,000; financing cash outflow was $164,000. Cash decreased by $3.966 million during the quarter. Total assets were $21.163 million and stockholders’ equity was $11.293 million at April 1, 2018. The company reported no operating cash generation and an accumulated deficit of approximately $258 million.
Changes and management commentary
- New-product revenue fell 32% year over year to $1.300 million, primarily because of lower ArcticLink III Display Bridge shipments to Samsung. Mature-product revenue rose 16% to $1.464 million.
- Gross profit increased slightly despite lower revenue, which management attributed mainly to a greater share of higher-margin mature products and lower cost of revenue.
- Research and development expense increased 11% to $2.699 million, primarily due to eFPGA development personnel and consulting costs. Selling, general and administrative expense increased 6% to $2.561 million, mainly reflecting sales and marketing hires.
- Management expects losses to continue through at least fiscal 2018 while it develops products and technologies. It believes cash and the credit facility will support operations and capital expenditures for the next 12 months, but says longer-term liquidity depends in part on sales growth and renewing or replacing the facility.
Liquidity, risks and unusual items
- The $6.0 million revolving facility with Silicon Valley Bank was fully drawn and is due to expire September 24, 2018. The company reported compliance with its covenants at quarter-end, including a $6.0 million minimum unrestricted-cash requirement and a minimum 1.40:1 quick-assets covenant.
- Management believes it can renew the facility or obtain alternative financing, but provides no assurance. Failure to generate sales or secure financing could impair operations and covenant compliance.
- Commitments included $946,000 for wafer and finished-goods purchases and $1.609 million of other purchase commitments. The company depends on a limited number of suppliers and contract manufacturers, with advance ordering and potential capacity, delivery, quality and inventory risks.
- Samsung represented 10% of total quarterly revenue. Distributor A accounted for 42% of revenue and 52% of accounts receivable, creating concentration exposure.
- The company disclosed ordinary-course legal matters, including potential intellectual-property and collection disputes, but no specific material proceeding or quantified contingency in the supplied text.
- Revenue-recognition guidance was adopted January 1, 2018, with no material reported impact or opening retained-earnings adjustment. Foreign-currency exposure is unhedged; management estimated a 10% exchange-rate fluctuation would change quarterly operating expenses by approximately $146,000.
Investor verification priorities
- Track new-product and eFPGA/IP revenue growth, including whether lower Samsung Display Bridge shipments are offset by other products and customers.
- Confirm renewal or replacement of the fully drawn credit facility before its September 2018 expiration, and monitor minimum-cash and quick-assets covenant compliance.
- Assess quarterly cash burn, cash runway, and progress toward management’s stated 12-month liquidity outlook.
- Monitor customer and distributor concentration, supplier capacity and wafer commitments, and inventory obsolescence risk.
- Review the referenced 2017 Form 10-K risk factors and any subsequent updates on litigation, financing, and the company’s continuing operating losses.