QuickLogic Corporation — Q1 2022 Form 10-Q
Reporting period: Three months ended April 3, 2022; comparative quarter ended April 4, 2021. Unaudited results. QuickLogic develops low-power semiconductor platforms and IP, including eFPGA technology, and sensor-processing software through SensiML.
Financial performance
| Metric | Q1 2022 | Q1 2021 | Change / context |
|---|---|---|---|
| Revenue | $4.096 million | $2.240 million | Up 83% |
| Gross profit / margin | $2.461 million / 60% | $1.144 million / 51% | Gross profit up 115%; margin improved about 9 percentage points |
| Operating expenses | $3.470 million | $3.834 million | Down 9%; R&D decreased, SG&A increased |
| Operating loss | $1.009 million | $2.690 million | Operating margin improved from (120%) to (25%) |
| Net loss | $1.164 million | $1.689 million | Loss per share: $(0.10) vs. $(0.15) |
| Operating cash flow | $(0.700) million | $(1.003) million | Cash used decreased |
| Investing cash flow | $(0.149) million | $(0.283) million | Primarily capitalized software and equipment |
| Cash and restricted cash | $20.140 million | $19.605 million at Jan. 2, 2022 | Quarter-end balance |
| Revolving credit debt | $15.000 million | $15.000 million at Jan. 2, 2022 | Interest rate 4.00% at quarter-end |
Business mix and material changes
- New-product revenue was $3.450 million, 84% of sales, versus $1.075 million, or 48%, a year earlier. The increase included $1.6 million of eFPGA IP-related engineering services and $0.8 million of smart-connectivity and display product revenue.
- Mature-product revenue fell 45% to $0.646 million. Management expects mature-product revenue to fluctuate.
- Revenue growth and mix supported gross-margin improvement. R&D expense fell 29% to $1.333 million, principally due to lower allocable expense, consulting, and stock-based compensation costs. SG&A rose 10% to $2.137 million, including higher stock-based compensation, accounting, and outside-service costs.
- Q1 2021 included a $1.192 million gain from forgiveness of a PPP loan; there was no comparable gain in Q1 2022. Q1 2022 also included $0.123 million of interest and other expense, largely reflecting foreign-exchange losses and other expenses.
Liquidity, debt, and commitments
- At April 3, 2022, current assets were $25.132 million and current liabilities $19.124 million; working capital was approximately $6.0 million. Cash and restricted cash were $20.140 million.
- Outstanding revolving debt was $15.0 million, secured by substantially all tangible and intangible assets. The company reported covenant compliance. Finance lease liabilities were $0.591 million; total operating and finance lease liabilities were $1.377 million.
- The February 2022 registered direct offering of 310,000 shares generated approximately $1.5 million net proceeds at $4.78 per share. Proceeds were intended for working capital, next-generation eFPGA products, including AI and open-source hardware or software, and general corporate purposes.
- Management said cash and available resources under the revolving facility should fund operations and capital expenditures for the next 12 months. Longer-term plans depend in part on new-product sales and renewing or replacing the facility before its December 2023 expiration; additional capital may not be available on acceptable terms.
- Outstanding commitments included $0.8 million for wafer and finished-goods inventory and $0.9 million for other goods and services due within 12 months.
Outlook, risks, and other disclosures
- Management expected revenue growth in fiscal 2022 from EOS S3, SensiML AI SaaS, and eFPGA IP licensing, but also expected losses to continue through at least fiscal 2022 while it develops products and technologies. No specific revenue or earnings guidance was provided.
- Risks highlighted include converting design opportunities into revenue, customer adoption and product life cycles, semiconductor cyclicality and competition, manufacturing capacity and lead times, inventory obsolescence, and access to financing and covenant compliance. Management noted that higher-volume opportunities may lower gross margin percentage.
- Customer and distributor concentration was significant: three distributors each represented at least 10% of Q1 revenue, and three customers represented 17%, 27%, and 23%, respectively. The filing also reports significant receivables concentration among distributors.
- There was no litigation reported as of April 3, 2022, and no material change to the risk factors in the 2021 Form 10-K. The company reported no material COVID-19 impact changes and no material changes in internal control over financial reporting; disclosure controls were deemed effective at a reasonable-assurance level.
- On April 4, 2022, the company amended its Heritage Bank credit agreement, revising minimum-cash and remaining-months-liquidity covenants. On May 10, shareholders approved 900,000 additional shares for future awards under the 2019 Plan.
Important facts for investors to verify
- Whether new-product growth, particularly eFPGA-related services and licensing, is recurring and converts into sustainable product revenue.
- Whether gross-margin improvement persists as product mix changes and mature-product sales fluctuate.
- Cash burn, available liquidity, and compliance with the amended credit covenants, including the planned renewal or replacement of the revolving facility before December 2023.
- Exposure to major customers and distributors, manufacturing commitments, and potential inventory obsolescence.
- Expected losses through at least fiscal 2022 and the potential need for additional debt or equity financing.