QuickLogic Corporation — FY2012 Form 10-K
Reporting period: Fiscal year ended December 30, 2012. The filing also reports unaudited fourth-quarter results for the quarter ended December 30, 2012. QuickLogic is a fabless semiconductor company focused on customer-specific standard products (CSSPs), alongside legacy FPGA and related products.
Financial performance and liquidity
| Metric | FY2012 | FY2011 |
|---|---|---|
| Revenue | $14.944 million | $20.969 million |
| Gross profit / margin | $7.066 million / 47.3% | $12.452 million / 59.4% |
| Operating loss | $12.158 million | $7.349 million |
| Net loss | $12.314 million; $0.29 per share | $7.594 million; $0.21 per share |
| Operating cash flow | $(8.663) million | $(2.495) million |
| Capital expenditures | $1.241 million | $0.896 million |
- FY2012 cash and cash equivalents were $22.578 million; working capital was $24.840 million. Current liabilities were $3.339 million and total liabilities were $3.746 million.
- Debt consisted principally of $426,000 in capital lease obligations. The company had no borrowings on its $6.0 million revolving credit line at year-end; the facility was extended through June 28, 2013 and was subject to financial covenants, which the company reported meeting.
- Fourth-quarter revenue was $3.086 million and net loss was $2.559 million, or $0.06 per share. In Q4 2011, revenue was $4.346 million and net loss was $3.110 million, or $0.08 per share.
Material changes versus prior periods
- FY2012 revenue fell 29% year over year. Mature-product revenue declined 42% to $9.024 million, while new-product revenue rose 11% to $5.920 million and represented 40% of revenue.
- Gross margin fell to 47.3% from 59.4%, reflecting lower revenue, unabsorbed overhead and product mix. The company also benefited from selling $599,000 of previously reserved inventory.
- Operating expenses were $19.224 million, 129% of revenue. R&D decreased 11% to $8.743 million, while SG&A increased 5% to $10.481 million. The resulting operating loss widened substantially.
- Operating cash use increased to $8.663 million. Financing activities provided $12.279 million, primarily from equity issuance; the June 2012 offering of shares and warrants generated $11.9 million net proceeds. Shares outstanding rose to 44.506 million at year-end from 38.636 million a year earlier.
Outlook, commentary and risks
- Management said it expected existing cash resources to fund operations and capital expenditures for at least the next 12 months. It provided no specific revenue or earnings guidance in the filing.
- Management’s strategy depends on converting CSSP design opportunities into volume sales to offset anticipated declines in mature products. It introduced ArcticLink III VX and BX in 2012 and said it would emphasize Catalog CSSPs, including one developed with Texas Instruments.
- Management cautioned that CSSPs generally have lower gross margins than mature products, and high-volume opportunities may bring further price and margin pressure. It also noted short customer product cycles, uncertain demand, limited revenue visibility, and potential inventory obsolescence.
- Revenue concentration is meaningful: one customer accounted for 14% of FY2012 revenue, and three distributors each represented at least 10% of revenue. The company relies on a limited number of third-party manufacturers, including eSilicon and TowerJazz for new products, and generally has single-source manufacturing steps.
- U.S. deferred tax assets were substantially reserved: deferred tax assets were $60.3 million and the valuation allowance was $60.2 million. Federal and state net operating loss carryforwards begin expiring in 2013 if unused and may be limited by ownership changes.
- Ordinary-course legal matters include intellectual-property and collection claims; the filing does not identify a specific material pending case or quantify a potential loss. Foreign-exchange changes are unhedged; management estimated a 10% currency move would change 2012 operating expenses by approximately $360,000.
Important facts for investors to verify
- Whether CSSP design wins convert to sustained production revenue quickly enough to replace declining mature-product sales and improve gross margin.
- Quarterly revenue, gross margin, operating cash burn, inventory levels and any additional inventory reserves or write-offs.
- Liquidity and financing needs beyond management’s 12-month estimate, including renewal or replacement of the credit facility that expires in June 2013.
- Customer and distributor concentration, order cancellations or delays, and the company’s dependence on single-source suppliers and foundries.
- Potential dilution from the 2012 equity offering, its warrants, and outstanding equity awards; also monitor the usability and expiration of tax-loss carryforwards.