QuickLogic Corporation — FY2013 Form 10-K
Reporting period: Fiscal year ended December 29, 2013. The filing also provides unaudited fourth-quarter results for the quarter ended December 29, 2013. QuickLogic is a fabless semiconductor company focused on customizable low-power semiconductor solutions, particularly Customer Specific Standard Products (CSSPs) for mobile devices.
Financial performance
| Metric | FY2013 | FY2012 |
|---|---|---|
| Revenue | $26.1 million | $14.9 million |
| Gross profit / margin | $8.8 million / 34% | $7.1 million / 47% |
| Operating loss | $11.8 million | $12.2 million |
| Net loss | $12.3 million | $12.3 million |
| Net loss per share, diluted | $0.27 | $0.29 |
| Cash used in operations | $9.1 million | $8.7 million |
- FY2013 revenue rose 74%. New-product revenue increased 208% to $18.2 million, or 70% of sales; mature-product revenue fell 13% to $7.9 million.
- Gross margin declined to 34% from 47%, reflecting customer and product mix, Samsung concentration, inventory reserves, and unabsorbed overhead. QuickLogic also sold previously reserved inventory, contributing $596,000 to 2013 gross profit.
- Fourth-quarter revenue was $8.9 million, gross profit $2.8 million, operating loss $3.1 million, and net loss $3.2 million, or $0.07 per diluted share. Revenue was $3.1 million in Q4 2012; the gross margin was approximately 31% in Q4 2013.
- At year-end, cash and cash equivalents were $37.4 million, working capital $37.8 million, total assets $49.1 million, and stockholders’ equity $40.6 million. Total liabilities were $8.5 million.
- Debt included $1.0 million drawn on a revolving credit line and $310,000 of capital software leases. The $6.0 million revolving facility had $5.0 million available and was scheduled to expire June 27, 2014; the company reported covenant compliance.
Material changes, outlook, and risks
- Samsung-designed ArcticLink III VX shipments into a new tablet platform drove much of the growth: Samsung accounted for 56% of FY2013 revenue, 69% of Q4 revenue, and 80% of new-product revenue for the year.
- Mature-product sales, including products serving aerospace, test, and instrumentation customers, declined. Management expects mature-product revenue to continue declining and relies on CSSP and other new-product growth to offset that decline and support a return to profitability.
- Management stated that cash, available credit, and other financial resources should fund operations and capital expenditures for the next 12 months. The filing provides no specific revenue or earnings guidance. Management cautioned that CSSPs generally carry lower gross margins than mature products and that higher-volume opportunities may further pressure margins.
- FY2013 financing included a November share offering of 8.74 million shares that raised $23.1 million net. The offering increased outstanding shares and funded liquidity while the company continued to report operating losses.
- Contractual obligations included $10.8 million of wafer purchase commitments, primarily due within one year, $701,000 of other purchase commitments, and $1.8 million of operating lease payments. These commitments increase inventory and cash-flow exposure if demand disappoints.
- Key risks include customer concentration and limited order visibility; short mobile-product life cycles and design-win conversion; pricing and margin pressure; possible inventory obsolescence; dependence on single or limited-source foundries and other suppliers; and the possibility that available cash or financing will not be sufficient if operating performance falls short.
- The company recorded a $63.5 million valuation allowance against deferred tax assets of $63.6 million, reflecting uncertainty about future utilization. Federal and state net operating loss carryforwards begin expiring in 2014 if unused. Routine legal matters include intellectual-property and collection claims; the filing gives no clear quantified exposure.
- Management and the auditor reported effective internal control over financial reporting. The auditor issued an unqualified opinion on the financial statements.
Important facts for investors to verify
- Whether Samsung-related demand and new CSSP design wins continue, and whether customer concentration decreases.
- Whether new-product growth can offset declining mature-product sales while improving gross margin and reducing operating cash burn.
- Inventory levels, reserves, and the recoverability of wafer commitments as mobile-product demand and product life cycles evolve.
- Cash use, covenant compliance, and refinancing or renewal of the revolving facility before its June 2014 expiration.
- The potential dilution from equity financing and outstanding stock awards, and the usability and expiration profile of tax-loss carryforwards.