QuickLogic Corporation — Q2 2022 Form 10-Q
Reporting period: Fiscal quarter ended July 3, 2022; six-month period ended July 3, 2022. Unaudited results; amounts below are in millions except per-share data.
Business context
QuickLogic develops low-power semiconductor platforms, embedded software and eFPGA intellectual property (IP) for AI, voice and sensor processing. Its SensiML subsidiary provides sensor-algorithm development software. The company reports as one business segment.
Financial performance
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $4.541 | $2.882 | $8.637 | $5.122 |
| Gross profit / margin | $2.544 / 56% | $1.466 / 51% | $5.005 / 58% | $2.610 / 51% |
| Operating loss | $(0.627) | $(1.980) | $(1.636) | $(4.670) |
| Net loss | $(0.524) | $(2.062) | $(1.688) | $(3.751) |
| Loss per share, basic and diluted | $(0.04) | $(0.18) | $(0.14) | $(0.33) |
| Operating cash flow | Not separately provided for the quarter | $(2.063) | $(2.812) |
Q2 revenue increased 58% year over year. New-product revenue rose 148% to $3.131 million, including $1.617 million of eFPGA IP revenue; mature-product revenue fell 13% to $1.410 million. Management attributed much of the new-product and eFPGA IP increase to professional-services revenue. Q2 operating expenses were $3.171 million, down 8% year over year, as lower R&D expense more than offset higher selling, general and administrative expense.
For the first half, new-product revenue increased 182% to $6.581 million, while mature-product revenue decreased 26% to $2.056 million. The prior-year six-month comparison included a $1.192 million gain from forgiveness of a PPP loan; no such gain was recorded in 2022.
Financial position and liquidity
- At July 3, 2022, cash, cash equivalents and restricted cash were $18.546 million, compared with $19.605 million at January 2, 2022. Current assets were $25.519 million and current liabilities were $19.397 million.
- The company had $15.0 million outstanding on its revolving credit facility, bearing interest at 5.25%; it was compliant with loan covenants. The facility is expected to expire in December 2023, and continued financing beyond then depends on renewal or alternative borrowing.
- Finance lease liabilities were $0.492 million; total operating and finance lease liabilities were $1.187 million. The company also reported $0.6 million of wafer purchase commitments and $1.2 million of other purchase obligations due within 12 months.
- Six-month investing cash outflow was $0.402 million. Financing provided $1.406 million, primarily reflecting $1.6 million of stock proceeds, including approximately $1.5 million net proceeds from a February registered offering. Operating cash outflow was driven in part by a $2.266 million increase in accounts receivable and lower deferred revenue.
Outlook, risks and notable items
- Management said existing cash and available revolving-facility resources should fund operations and capital expenditures for the next 12 months. It expects losses to continue through at least fiscal 2022 as it invests in products and technology; no specific revenue or earnings guidance was provided.
- Longer-term liquidity depends on new-product sales, access to capital and renewal or replacement of the credit facility. Risks include converting design opportunities into revenue, product acceptance, semiconductor cyclicality, manufacturing capacity and costs, inventory and wafer commitments, and covenant compliance. Management warned that failure to generate sales or raise capital could materially affect operations and financial condition.
- On August 8, 2022, after quarter-end, QuickLogic signed an eFPGA development agreement with a new customer for $6.9 million of fees over approximately 12 months. Following successful performance, the customer may extend the work to tens of millions of dollars over multiple years; the extension is not assured.
- Revenue was concentrated: one customer represented 29% of Q2 revenue, and several named distributors or customers each exceeded 10% in at least one reported period. Management reported no material COVID-19 changes, no material changes to previously disclosed risk factors, and no legal proceedings. Disclosure controls were assessed as effective at the reasonable-assurance level.
Important facts for investors to verify
- Whether the eFPGA agreement’s work is delivered and recognized as revenue as expected, and whether any extension is secured.
- How much growth is recurring IP licensing versus professional-services revenue, and whether the Q2 mix and gross margin are sustainable.
- Customer and distributor concentration, receivables collection, and the effect of working-capital needs on cash burn.
- Availability and terms of financing before the revolving facility’s December 2023 expiration, including ongoing covenant compliance.
- Progress toward reducing losses while funding product development, and the potential effects of equity issuance and stock-based compensation on dilution.