QuickLogic Corporation — Q2 2018 Form 10-Q
Reporting period: Three and six months ended July 1, 2018. Financial statements are unaudited. Unless noted, amounts below are in millions of dollars.
Business context
QuickLogic is a fabless semiconductor company serving mobile, wearable and IoT markets with low-power SoC solutions, FPGAs, embedded software and eFPGA intellectual property. It reported one business segment.
Financial performance and liquidity
| Metric | Q2 2018 | Q2 2017 | Six months 2018 | Six months 2017 |
|---|---|---|---|---|
| Revenue | $3.122 | $3.026 | $5.886 | $6.196 |
| Gross profit / margin | $1.530 / 49% | $1.380 / 46% | $2.919 / 50% | $2.753 / 44% |
| Operating expenses | $4.976 | $4.933 | $10.236 | $9.774 |
| Operating loss | $(3.446) | $(3.553) | $(7.317) | $(7.021) |
| Net loss | $(3.484) | $(3.607) | $(7.454) | $(7.172) |
| Basic and diluted loss per share | $(0.04) | $(0.05) | $(0.09) | $(0.10) |
- Q2 revenue increased 3% year over year and 13% sequentially, according to management. New-product revenue was $1.581 million, up 6% year over year; mature-product revenue was $1.541 million, essentially flat.
- Six-month revenue declined 5%. New-product revenue fell 15% to $2.881 million, primarily due to lower display-bridge shipments; mature-product revenue rose 8% to $3.005 million, supported by aerospace, test and instrumentation orders.
- Gross margin improved year over year in both periods, attributed mainly to favorable product mix. Operating costs increased 5% for the six-month period, including higher R&D costs.
- Cash used in operating activities was $7.473 million for the six months, versus $7.758 million a year earlier. Investing activities used $0.095 million; financing activities provided $13.856 million. Cash and cash equivalents ended at $22.815 million, up from $16.527 million at year-end 2017.
- At July 1, current assets were $30.395 million and current liabilities $9.831 million. Debt and lease obligations totaled $6.418 million: $6.0 million drawn on the revolving facility and $0.418 million in capital leases.
Material changes, outlook and risks
- In May, the company issued approximately 13.5 million shares and warrants to buy approximately 5.4 million additional shares, raising net proceeds of $13.9 million. Warrants are exercisable for five years at $1.38 per share. Shares outstanding increased from 80.536 million at December 31, 2017 to 94.575 million at July 1, 2018.
- The $6.0 million Silicon Valley Bank revolving facility was fully drawn and expires September 24, 2018. The company was in compliance with covenants at quarter-end, including a minimum $6.0 million cash requirement and a quick-assets ratio requirement. Management expected to renew the facility or obtain alternative financing but gave no assurance it could do so on acceptable terms.
- Management expected continued losses through fiscal 2018 and stated that cash, together with the revolving facility, should fund operations and capital expenditures for the next twelve months from issuance of the financial statements. This outlook depends on sales growth, financing availability and covenant compliance. Planned capital expenditures for the remainder of 2018 were approximately $0.260 million. No specific revenue or earnings guidance was provided.
- Key risks include ongoing losses and cash burn, reliance on a timely renewal or replacement of the credit facility, dependence on limited-source manufacturers and suppliers, long manufacturing lead times and potential inventory obsolescence. A distributor represented 32% of Q2 revenue; customer and distributor concentration was also present in receivables.
- Outstanding wafer-purchase commitments were $0.067 million and other purchase commitments were $1.632 million. The filing describes possible ordinary-course legal claims, including intellectual-property matters, but does not identify a specific material proceeding or quantify a contingency.
Investor facts to verify
- Whether the credit facility was renewed or replaced before its September 2018 expiry, and subsequent covenant compliance.
- Whether new-product sales—particularly sensor-processing, display-bridge and eFPGA offerings—translated into sustained revenue growth and reduced operating losses.
- Cash burn, working-capital trends and the use of May offering proceeds, alongside the impact of the new shares and warrants on dilution.
- Customer and distributor concentration, manufacturing capacity and inventory-obsolescence exposure.