QuickLogic Corporation — Form 10-Q Summary
Reporting period: Second quarter and six months ended July 4, 2021; comparative periods ended June 28, 2020. Figures are unaudited and in millions of dollars unless noted.
Business context
QuickLogic develops low-power semiconductor platforms, eFPGA intellectual property and AI/sensor-processing software, including offerings from its SensiML subsidiary. It operates as a single reportable segment. Management is investing in new silicon products, eFPGA licensing and SensiML software while continuing to sell mature products.
Financial results and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $2.882 | $2.196 | $5.122 | $4.354 |
| Gross profit / margin | $1.466 / 51% | $1.004 / 46% | $2.610 / 51% | $2.119 / 49% |
| Operating loss | $(1.980) | $(2.895) | $(4.670) | $(5.957) |
| Net loss | $(2.062) | $(2.979) | $(3.751) | $(6.144) |
| Net loss per share | $(0.18) | $(0.35) | $(0.33) | $(0.73) |
- Q2 revenue rose 31% year over year; new-product revenue increased 54% to $1.262 million, while mature-product revenue increased 18% to $1.620 million. For the first half, new-product revenue rose 79% to $2.337 million, while mature-product revenue declined 9% to $2.785 million.
- Operating expenses were $3.446 million in Q2, down 12% year over year, including lower R&D spending; six-month expenses were $7.280 million, down 10%. No restructuring costs were recorded in 2021 periods.
- Six-month operating cash use was $2.812 million, investing cash use was $0.447 million, and financing cash use was $0.493 million. Cash, cash equivalents and restricted cash fell to $18.996 million from $22.748 million at January 3, 2021.
- At July 4, cash included $15.0 million drawn on the revolving credit facility. The facility bore 3.75% interest and matured September 28, 2022; the company also had $0.513 million of finance-lease debt and $1.558 million of total lease liabilities. It reported compliance with loan covenants at quarter-end.
- Current assets were $24.248 million and current liabilities $18.672 million. The balance sheet showed $8.969 million of stockholders’ equity and a $298.160 million accumulated deficit.
Material changes and unusual items
- Q2 gross margin improved to 51% from 46%, primarily on higher revenue and product mix, partly offset by a $156,000 raw-material inventory write-down. Six-month inventory write-downs were $229,000.
- Six-month 2021 results included a $1.192 million gain from forgiveness of the PPP loan. The loan was forgiven in January 2021; the gain is nonrecurring and reduced reported net loss.
- R&D expense declined year over year, which management attributed primarily to the 2020 restructuring and reduced spending during the pandemic. SG&A rose, partly due to legal and consulting costs.
- Revenue was concentrated: in Q2, one disclosed distributor accounted for 29% and one disclosed customer for 35%; the filing uses anonymized labels. Japan accounted for 32% of Q2 revenue.
Outlook, risks and contingencies
- Management expected revenue growth from EOS S3, SensiML AI SaaS and eFPGA licensing in fiscal 2021. It provided no specific numerical revenue or earnings guidance and expected losses to continue through at least fiscal 2021.
- Management believed cash and available resources under the Heritage Bank facility would fund operations and capital expenditures for the next 12 months. Longer-term funding depends on new-product sales and potentially additional capital; no assurance was given that financing would be available on acceptable terms.
- On August 16, 2021, after quarter-end, the bank amended the loan agreement, waiving noncompliance with the minimum unrestricted-cash covenant and revising its test: at least $3.0 million must be held at the bank immediately before a credit extension and while an advance is outstanding. A $5,000 fee plus bank expenses was payable. This is a notable liquidity and covenant development despite reported quarter-end covenant compliance.
- COVID-19 had caused supply-chain, logistics and customer-deployment disruptions. Management said alternative arrangements had prevented a material impact on demand fulfillment to date, but future effects remained uncertain.
- The company relies on a limited number of contract manufacturers and suppliers, must forecast wafer demand in advance, and reported $559,000 of wafer/finished-goods commitments and $945,000 of other purchase obligations due within 12 months.
- The company was appealing an Indian transfer-pricing assessment for tax year 2017–18; the potential effect was under evaluation and, if any, would affect foreign tax provision and taxes payable. No litigation was reported at quarter-end.
Important facts for investors to verify
- Whether new-product growth—especially eFPGA licensing, EOS S3 and SensiML—can continue and convert into sustained revenue and improved cash generation.
- The details and ongoing compliance implications of the August 16 minimum-cash covenant amendment, including the company’s unrestricted cash position and access to the revolving facility.
- Customer and distributor concentration, and the impact of demand changes, product life cycles and supply constraints on revenue and inventory exposure.
- The underlying operating-loss trend excluding the $1.192 million PPP forgiveness gain, alongside continuing cash burn and financing needs.
- The outcome and potential tax exposure from the Indian transfer-pricing appeal, and any subsequent developments in COVID-related supply-chain risks.