Business context and reporting period
QuickLogic Corporation designs and markets low-power programmable semiconductor solutions, including customer-specific standard products (CSSPs) and FPGAs for mobile, consumer, and industrial markets. This unaudited Form 10-Q covers the three months ended March 31, 2013; the comparable 2012 quarter ended April 1, 2012. Amounts below are in U.S. dollars.
Financial results and liquidity
| Metric | Q1 2013 | Q1 2012 |
|---|---|---|
| Revenue | $3.017 million | $4.130 million |
| Gross profit / margin | $1.031 million / 34.2% | $1.759 million / 42.6% |
| Operating loss | $3.514 million | $3.740 million |
| Net loss | $3.584 million | $3.721 million |
| Basic and diluted loss per share | $0.08 | $0.10 |
| Cash used in operating activities | $2.829 million | $2.834 million |
Cash and cash equivalents were $19.659 million at March 31, 2013, down from $22.578 million at December 30, 2012. Current assets were $24.725 million and current liabilities $2.921 million. Total liabilities were $3.223 million; capital lease obligations totaled $374,000. The $6.0 million revolving credit facility was undrawn, and the company reported covenant compliance. It expires June 28, 2013.
Material changes versus the prior comparable period
- Revenue fell 27% year over year and 2% sequentially. New-product revenue declined 43% year over year to $941,000; mature-product revenue declined 17% to $2.076 million.
- Gross margin decreased to 34.2% from 42.6%, with lower sales and higher unabsorbed overhead cited as key factors. Inventory write-downs were $343,000, partly offset by $215,000 of sales from previously reserved inventory.
- Operating expenses decreased 17% to $4.545 million, mainly reflecting lower third-party chip design costs. Despite the expense reduction, the operating loss remained substantial.
- Operating cash use was nearly unchanged year over year. Cash declined $2.919 million during the quarter.
Outlook, commentary, and risks
- Management said existing cash resources were expected to fund operations, capital equipment purchases, and working capital for at least 12 months. No specific revenue or earnings guidance was provided. Capital expenditures were projected at approximately $1.4 million for the remainder of fiscal 2013.
- Management is emphasizing CSSPs and Catalog CSSPs to drive growth, while expecting mature-product revenue to continue declining. CSSPs generally carry lower gross margins than FPGA products, and large-volume opportunities may add revenue while pressuring margins.
- Wafer purchase commitments rose to $3.521 million from $621,000 at year-end; other purchase commitments were $799,000. These commitments, alongside operating lease commitments, create cash requirements even if demand weakens.
- Revenue and receivables are concentrated: Distributor A represented 40% of quarterly revenue and 39% of receivables at quarter-end; Customer B represented 24% of revenue. The company also depends on limited-source manufacturers and suppliers, which may constrain supply or increase costs.
- Mobile-market product cycles may raise inventory obsolescence risk. Other disclosed risks include foreign-currency exposure (no hedging; a 10% exchange-rate move was estimated to change quarterly operating expenses by about $89,000), equity-price exposure from the TowerJazz investment, and ordinary-course legal matters that could require costly litigation or payments.
- A March 28 engineering restructuring produced an initial $7,000 severance charge, with related charges to be prorated over three months. Management reported disclosure controls were effective at a reasonable-assurance level and no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether the revolving credit facility expiring June 28, 2013 was renewed, replaced, or allowed to expire, and whether covenant compliance continued.
- Whether CSSP design opportunities converted into sales and whether new-product revenue and gross margin stabilized or improved.
- Whether wafer commitments and inventory levels were matched to demand, and whether additional write-downs or excess inventory emerged.
- Whether cash burn remained consistent with management’s stated minimum 12-month liquidity outlook, including planned capital spending and supplier commitments.
- Whether customer and distributor concentration, supplier availability, or legal contingencies changed materially after quarter-end.