QuickLogic Corporation — Form 10-Q Summary
Reporting period: Third quarter ended September 27, 2020; comparisons are with the quarter ended September 29, 2019. The filing also reports year-to-date results for the nine months ended September 27, 2020. QuickLogic is a fabless semiconductor company focused on low-power sensor and AI processing, eFPGA IP, and related software, including SensiML.
Key financial results
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $1.780 million | $2.158 million | $6.134 million | $7.439 million |
| Gross profit / margin | $0.923 million / 52% | $1.041 million / 48% | $3.042 million / 50% | $4.042 million / 54% |
| Operating expenses | $2.969 million | $5.234 million | $11.045 million | $16.477 million |
| Operating loss | $(2.046) million | $(4.193) million | $(8.003) million | $(12.435) million |
| Net loss | $(2.065) million | $(4.271) million | $(8.209) million | $(12.381) million |
| Basic and diluted loss per share | $(0.19) | $(0.51) | $(0.88) | $(1.66) |
At September 27, 2020, cash, cash equivalents and restricted cash were $24.685 million, versus $21.548 million at December 29, 2019. Current assets were $30.105 million and current liabilities $18.792 million. Total liabilities were $20.621 million; stockholders’ equity was $14.247 million.
For the first nine months, operating cash outflow was $5.145 million, investing cash outflow $0.762 million, and financing cash inflow $9.044 million, producing a $3.137 million net cash increase. Financing included $8.1 million of net equity-offering proceeds and $1.191 million of PPP loan proceeds.
At quarter-end, debt included $15.0 million drawn on the revolving facility, $1.192 million of PPP loan principal, and approximately $0.620 million of finance lease liabilities. The company repaid the $15.0 million revolving balance on September 28, the day after quarter-end. The facility matures September 2021 and requires at least $3.0 million of unrestricted cash at Heritage Bank.
Changes versus comparable periods
- Q3 revenue fell 18% year over year. New-product revenue declined 37% to $0.639 million; mature-product revenue was essentially flat at $1.141 million. Management attributed the new-product decrease mainly to lower connectivity-product revenue.
- Year-to-date revenue decreased 18%. New-product revenue fell 19%, while mature-product revenue fell 17%; management cited lower connectivity and display shipments and weaker mature-product orders from aerospace, military and industrial customers.
- Q3 gross margin improved to 52% from 48%, although gross profit dollars fell 11%, mainly due to product mix. Year-to-date gross margin declined to 50% from 54%, reflecting mix, lower shipments of high-margin mature products, and additional testing costs.
- Operating expenses declined substantially following the January 2020 restructuring and reduced compensation, outside services and travel costs. The company recorded $0.624 million of restructuring charges in the first nine months, including $0.111 million in Q3.
- Common shares outstanding rose from 8.331 million at December 29, 2019 to 11.068 million at September 27, 2020, primarily reflecting the 2020 public offering.
Outlook, risks and unusual items
- No specific numerical revenue or earnings guidance is provided. Management expects revenue from new offerings to be important to growth and profitability, and says cash and expected resources should fund operations and capital expenditures for the next 12 months. Long-term liquidity depends partly on sales growth and renewing the revolving facility or securing replacement financing before its September 2021 maturity.
- Management expects COVID-19 to adversely affect Q4 2020 revenue and results, potentially continuing into later quarters. Risks include supply-chain and logistics delays, customer deployment disruptions, and reduced demand; the overall duration and financial impact remain uncertain.
- The company had fully used the $1.2 million PPP loan in accordance with program guidance and expected to apply for full forgiveness in Q4 2020. Forgiveness is not recognized until legal release is received; repayment obligations therefore remain a consideration.
- Supplier concentration and advance wafer commitments expose the company to capacity, delivery, cost and inventory risks. Wafer and finished-goods commitments were $0.141 million; other purchase obligations due within 12 months were $0.469 million.
- Revenue concentration is significant: in Q3, three distributors each represented at least 10% of revenue, and several customers also met that threshold. COVID-19 and U.S.-China trade or export restrictions are identified as material risks. No litigation was reported. Management judged disclosure controls effective at a reasonable assurance level.
Most important facts to verify
- Post-quarter liquidity after repayment of the $15.0 million revolving balance, including available borrowing capacity, covenant compliance and the facility’s renewal or replacement plan.
- Whether the PPP loan is forgiven, and the timing and amount of any repayment if forgiveness is denied or partial.
- Subsequent revenue trends, especially new-product demand and customer deployments, given management’s warning of Q4 COVID-19 impact.
- Customer and distributor concentration, gross-margin recovery, and execution of the restructuring and new-product strategy.
- Potential supply-chain disruption, inventory obsolescence, and exposure to tariffs or export restrictions.