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QC

QUICKLOGIC Corp (QUIK)·Q2 2020 Earnings Summary

Executive Summary

  • Revenue was $2.20M (+2% QoQ, +5% YoY), while non-GAAP gross margin compressed to 47.1% due to higher test costs tied to a surge at the primary smartphone customer; non-GAAP EPS improved to $(0.26) from $(0.37) in Q1 .
  • New product revenue rose to $0.80M (+69% QoQ), driven by EOS S3 shipments; mature revenue was $1.40M, flat YoY but down 18% QoQ .
  • Management launched the Open Reconfigurable Computing (QORC) initiative with Google/Antmicro and raised ~$8.1M net via an oversubscribed offering; added to the Russell Microcap Index .
  • Guidance: Q3 revenue $2.0M ±15%, non-GAAP GM ~55% ±5%, OpEx ~$3.1M ±$0.3M, non-GAAP net loss ~$2.1M (≈$(0.19) per share); FY20 outlook cut to “approximately flat” revenue with GM now guided to “high 50s” (down from mid-60s prior) .
  • Near-term stock catalysts: execution on AVS certification and hearables ramp, eFPGA license conversion, and QORC adoption; headwinds include mature aerospace weakness and smartphone inventory digestion in Q3 .

What Went Well and What Went Wrong

What Went Well

  • New product revenue increased 69% QoQ to $0.80M, led by EOS S3; overall revenue rose 2% QoQ and 5% YoY in Q2 .
  • Strategic progress: QORC launched with Google/Antmicro, positioning QuickLogic as “the first programmable logic vendor to actively embrace a fully open source suite of development tools” for FPGA/eFPGA; early traction via QuickFeather dev kits and channel expansion plans .
  • Cost discipline: non-GAAP OpEx fell to ~$3.2M (down >30% YoY), reflecting restructuring and streamlining; management expects OpEx to trend lower through FY20 .
  • Capital and ecosystem: completed oversubscribed equity raise ($8.1M net), and SensiML advanced integrations (ST SensorTile Box; TensorFlow Lite for Microcontrollers), broadening partner co-marketing reach .

What Went Wrong

  • Gross margin compressed (non-GAAP 47.1% vs. 52.2% in Q1), primarily due to increased test costs from higher smartphone shipments; GAAP GM fell to 45.7% .
  • Mature products faced ongoing COVID-related aerospace weakness; management reduced 2H mature revenue by another ~$2M and expects a Q3 dip to levels similar to Q3’19 before a Q4 recovery .
  • FY20 outlook cut: management now expects revenue “approximately flat” vs. FY19 and GM in “high 50s,” down from prior “mid-60s,” citing smartphone inventory absorption and hearables push-outs; breakeven trajectory shifted to 2021 .

Financial Results

MetricQ2 2019Q1 2020Q2 2020
Revenue ($USD Millions)$2.09 $2.16 $2.20
GAAP Gross Margin (%)49.0% 51.7% 45.7%
Non-GAAP Gross Margin (%)49.8% 52.2% 47.1%
GAAP OpEx ($USD Millions)$5.56 $4.18 $3.90
Non-GAAP OpEx ($USD Millions)$4.80 $4.10 $3.20
GAAP EPS (Basic & Diluted)$(0.65) $(0.38) $(0.35)
Non-GAAP EPS$(0.54) $(0.37) $(0.26)
Cash, Cash Equivalents & Restricted Cash ($USD Millions)N/A$19.0 $26.4
Shares (Basic & Diluted, Millions)7.09 8.36 8.56
Segment Revenue ($USD Millions)Q2 2019Q1 2020Q2 2020
New Products$0.71 $0.54 $0.82
Mature Products$1.40 $1.70 $1.40
KPIs & MixQ2 2019Q1 2020Q2 2020
New Products (% of Revenue)34% 23% 37%
Mature Products (% of Revenue)66% 77% 63%
Revenue by Geography: Asia Pacific (%)26% 19% 36%
Revenue by Geography: North America (%)51% 44% 58%
Revenue by Geography: Europe (%)23% 37% 6%
Customers ≥10% of Sales (Count)N/A5 3
Estimate ComparisonQ2 2019Q1 2020Q2 2020
Revenue vs ConsensusN/AN/AN/A (S&P Global consensus unavailable)
EPS vs ConsensusN/AN/AN/A (S&P Global consensus unavailable)

Note: Q2 revenue increased 5% YoY and 2% QoQ; new product revenue increased 69% QoQ and 15% YoY; mature product revenue was flat YoY and down 18% QoQ .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ2 2020$2.5M ±10% (from Q1 call) Actual: $2.20M Miss vs prior guidance
Non-GAAP GMQ2 2020~61% ±3% (from Q1 call) Actual: 47.1% Lower than guided
Non-GAAP OpExQ2 2020~$3.5M ±$0.3M (from Q1 call) Actual: ~$3.2M Better than guided (lower)
Non-GAAP Net LossQ2 2020~$2.0M; EPS ≈ $(0.23) (from Q1 call) Actual: $2.2M; EPS $(0.26) Slightly worse
RevenueQ3 2020—$2.0M ±15% (mix: ~$0.7M new, ~$1.3M mature) New guidance
Non-GAAP GMQ3 2020—~55% ±5% New guidance
Non-GAAP OpExQ3 2020—~$3.1M ±$0.3M (R&D ~$1.8M; SG&A ~$1.3M) New guidance
Non-GAAP Net LossQ3 2020—~$2.1M; ≈ $(0.19) per share New guidance
Stock-Based CompQ3 2020—~$0.7M New guidance
Cash UsageQ3 2020—$2.0M–$2.5M; decline expected in Q4 New guidance
FY RevenueFY 2020Mid-to-high teens (prior view, Feb) Approximately flat vs FY2019 ($10.3M) Lowered
FY Gross MarginFY 2020Mid-60s (prior view) High-50s; Q4 back to low–mid 60s Lowered

Earnings Call Themes & Trends

TopicQ4 2019 (Prev-2)Q1 2020 (Prev-1)Q2 2020 (Current)Trend
Open-source/QORCAnnounced mega-cap initiative; open-source tooling plan Teased broader launch; QuickFeather board introduced Formal QORC launch with Google/Antmicro; early QuickFeather demand; goal ≥1,000 kits by YE20 Accelerating engagement and ecosystem build
SensiML (AI SaaS)44 customers; ST/Nordic partnerships; conversion expected to drive FY20 GM COVID consortium; NXP i.MX RT; plan to improve funnel/partner-led scaling TFL for Microcontrollers support; ST SensorTile Box integration; first SaaS agreement on COVID consortium; few dozen paid licenses Platform integrations and initial monetization
Smartphone (Kyocera)Multiple designs; ~$2M TAM contribution modeled Strong relationship; additional phones slated; no COVID impact Strong Q2 shipments, inventory build; test costs hurt GM; Q3 digestion expected; up to six phones using tech Near-term digestion; medium-term design pipeline intact
Hearables/AVSAVS-qualified solution showcased; ODM listing pending Expect AVS certification by Q2 end; COVID lab scheduling constraints On track for AVS certification in Q3; expect several hundred thousand dollars of EOS S3 shipments in 2020 Certification progress; 2H revenue potential
eFPGA IPLow-volume radiation-hardened license in Q4; multiple licenses possible License revenue in Q2; additional deals progressing; target “fingers and a thumb” licenses in 2020 Final netlist delivered; potential full license in Q4’20/Q1’21 Pipeline maturing; license conversion near-term
Supply chain/COVIDChina exposure limited but caution; step-up growth from Q2 Assembly constraints in PH; remote HW work delays; streaming remote canceled feature Supply chain normalizing; product launches pushed to late 2020/2021; mature aerospace weakness persists Normalizing ops; demand push-outs linger
Margin/BreakevenFY20 GM mid-60s; breakeven targeted late 2020 Q2 GM guided mid-60s; OpEx trending $3.5M Q3 GM guided ~55%; FY20 GM high-50s; breakeven path now 2021 with OpEx reduced Lower near-term margins; improved OpEx mix critical

Management Commentary

  • “We are the first programmable logic vendor to actively embrace a fully open source suite of development tools for its FPGA devices and eFPGA technology.”
  • “Based on this better than expected interest… I am confident we will achieve our goal to get at least a thousand of these dev kits into the market by the end of 2020… could see few to several million dollars in potential EOS S3 revenue and multiple eFPGA IP licenses next year directly related to the QORC initiative.”
  • “Kyocera had a very strong quarter… This greater than expected surge increased our test costs in the quarter, which negatively impacted our gross margin performance in Q2.”
  • “We are reducing our second half 2020 mature product revenue forecast by another $2 million… we now expect our full year 2020 revenue will be approximately flat with fiscal 2019… Q4 gross margin back into the low to mid 60% range… fiscal 2020 gross margin to the high 50s.”
  • CFO: “Non-GAAP operating expenses for Q2 were approximately $3.2 million, down more than 30% from $4.8 million in the second quarter of last year.”

Q&A Highlights

  • QORC pipeline: Engagements include a 2021 home computing device team; open-source tools expected to unlock embedded FPGA adoption at both large and smaller companies; early QuickFeather orders >100 in first month .
  • SensiML commercialization: Strategy pivots to partner-led scaling (ST/Nordic) and dev kits upsell; first SaaS agreement tied to COVID initiative; “few dozen” paid licenses to date .
  • Hearables/AVS: Confidence in AVS certification based on progress and lab engagement; AVS important for Western markets; China hearables offer non-AVS volumes .
  • Mature run-rate and breakeven: Mature revenue modeled around ~$1.5M per certain quarters with military offset; breakeven revenue now ~$5–$6M at current OpEx/margin structure (shifted from prior ~$10M) .
  • Smartphone/Kyocera: Strong Q2, inventory digestion in Q3; pipeline aiming for up to six phones using QuickLogic tech .

Estimates Context

  • S&P Global consensus for Q2 2020 EPS and revenue was unavailable during retrieval; management noted actual Q2 revenue of $2.2M was “within the updated guidance range of $2.3M ±10%” provided June 17 (SEC filing reference) .
  • Given the lack of accessible consensus figures, estimate comparisons and beat/miss designations cannot be determined (S&P Global consensus unavailable).

Key Takeaways for Investors

  • Mix shift matters: margin pressure from smartphone test costs and mature weakness is transitory; management targets Q4 GM back to low–mid 60% as software/IP mix increases .
  • Execution catalysts: AVS certification for hearables, eFPGA license conversion (Q4’20/Q1’21), and QORC adoption via Google/Antmicro and dev-kit channels could drive higher-margin revenue in 2H/2021 .
  • Near-term caution: Q3 guide embeds smartphone inventory digestion and mature aerospace softness; monitor new vs. mature mix and non-GAAP GM trajectory vs. 55% ±5% guide .
  • Cost discipline: OpEx reductions (>30% YoY) lower breakeven to ~$5–$6M quarterly revenue; incremental IP/SaaS deals can accelerate the path to profitability in 2021 .
  • Strategic positioning: Open-source-first approach and eFPGA tooling may structurally expand TAM; aligns with industry trends and partner ecosystems (ST, NXP, Nordic) .
  • Liquidity: Post-offering cash increased to $26.4M (includes $15M revolver draw; PPP loan); Q3 cash usage $2.0–$2.5M, expected to decline in Q4 .
  • Trading lens: Watch Q3 results for confirmation of margin recovery and mix improvements; any announcements on AVS certification, eFPGA licenses, or larger QORC wins could re-rate the stock on higher-margin visibility .