QuickLogic Corporation — Q1 2021 Form 10-Q
Reporting period: Three months ended April 4, 2021; comparable period ended March 29, 2020. Unaudited results. QuickLogic develops low-power semiconductor platforms and IP for AI, voice and sensor processing, along with SensiML sensor-algorithm software.
Financial highlights
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $2.240 million | $2.158 million | Up 4% |
| Gross profit / margin | $1.144 million / 51% | $1.115 million / 52% | Gross profit up 3%; margin down about 1 percentage point |
| Operating expenses | $3.834 million | $4.177 million | Down 8%, mainly as prior-year restructuring costs did not recur |
| Operating loss | $2.690 million | $3.062 million | Loss narrowed |
| Net loss | $1.689 million | $3.165 million | Loss narrowed; 2021 includes $1.192 million PPP-loan forgiveness gain |
| Net loss per share, diluted | $0.15 | $0.38 | Loss per share narrowed |
| Operating cash flow | $(1.003) million | $(2.175) million | Cash use decreased |
All amounts are in U.S. dollars. Revenue was 48% new products ($1.075 million, up 121%) and 52% mature products ($1.165 million, down 30%). Research and development was $1.887 million; selling, general and administrative expense was $1.947 million. The net loss remains substantial relative to revenue; the debt-forgiveness gain improved reported results but was not an operating revenue source.
Liquidity, debt and cash flow
- Cash, cash equivalents and restricted cash were $20.935 million at April 4, down $1.813 million from January 3. The balance includes $0.1 million of restricted cash.
- Current assets were $26.094 million and current liabilities $18.798 million. Stockholders’ equity was $10.682 million.
- The $15.0 million revolving credit facility was fully drawn at 3.75% interest; the facility matures September 28, 2022. The company reported covenant compliance and a $3.0 million minimum unrestricted-cash requirement.
- Finance lease obligations were approximately $0.626 million; total lease liabilities were $1.754 million. Total liabilities were $20.071 million.
- Cash used in investing activities was $0.283 million and cash used in financing activities was $0.527 million. Financing cash use primarily reflected taxes paid on equity awards; revolving-credit draws and repayments netted to zero.
- Management said cash and available financial resources were expected to fund operations and capital expenditures for the next twelve months. The filing also identifies future financing and sales-generation uncertainty.
Changes, outlook and risks
- Year-over-year revenue rose modestly as new-product revenue growth—primarily connectivity and sensor products—offset declines in mature products. Management also reported total revenue down 10% from the prior quarter, with new-product revenue up 28% and mature-product revenue down 30%; the comparable prior-quarter amounts are not specified here.
- Management expects revenue growth in fiscal 2021 from EOS S3, SensiML AI SaaS and eFPGA IP licensing, but provided no quantified revenue or earnings guidance. It expects losses to continue through at least fiscal 2021 while investing in product development.
- COVID-19 had caused supply-chain, customer-deployment and logistics disruptions. The company reported alternative solutions had prevented a material impact on demand fulfillment to date, but warned that further disruption could constrain supply or demand.
- Manufacturing relies on a limited number of suppliers, often a single supplier for a device; advance wafer commitments and limited ability to control supplier schedules, costs and quality create supply and inventory risks. Wafer and finished-goods commitments were $0.262 million, with $0.810 million of other purchase obligations due within twelve months.
- Revenue was concentrated: customer F represented 29% and customer N 13% of Q1 revenue; distributors C and E represented 23% and 29%, respectively. The filing also reports significant customer and distributor concentrations in receivables.
- India’s tax department disputed the company’s transfer-pricing rate for Assessment Year 2017–18. QuickLogic appealed on April 30, 2021; the potential effect on foreign tax expense was still being evaluated. No litigation was reported as of April 4.
- The company recorded a $0.152 million income-tax provision, largely related to foreign subsidiaries; this included a $0.125 million deferred tax provision associated with a one-time repatriation of funds from India. A valuation allowance remained against U.S. and certain foreign deferred tax assets.
Important facts for investors to verify
- Whether new-product growth, including eFPGA licensing and SensiML, can offset mature-product declines and support a path toward profitability.
- Cash burn, the fully drawn revolving facility, covenant compliance and the availability of refinancing or additional capital.
- The extent and persistence of COVID-related supply constraints and the company’s exposure to concentrated suppliers, customers and distributors.
- The outcome and potential tax impact of the India transfer-pricing appeal.
- The extent to which reported loss improvement reflects operating progress versus the one-time PPP forgiveness gain and the absence of prior-year restructuring costs.