Today's call is being recorded for replay purposes through November 24, 2021. I would now like to turn the call over to Mr. Jim Fanucchi of Darrow Associates. Mr. Fanucchi, please go ahead.

Thank you, operator and thanks to all of you for joining us. Our speakers today are Brian Faith, President and Chief Executive Officer and Anthony Contos, Interim Chief Accounting Officer. As a reminder, some of the comments QuickLogic makes today are forward-looking statements that involve risks and uncertainties, including but not limited to stated expectations relating to revenue from new and mature products; statements pertaining to QuickLogic's future stock performance, design activity and its ability to convert new design opportunities into production shipments; timing and market acceptance of its customers' products; schedule changes and production start dates that could impact the timing of shipments; the company's future evaluation systems; broadening the number of our ecosystem partners; and expected results and financial expectations for revenue, gross margin, operating expenses, profitability and cash. Actual results or trends may differ materially from those discussed today. For more detailed discussions of the risks, uncertainties and assumptions that could result in those differences, please refer to the risk factors discussed in QuickLogic's most recently filed periodic reports with the SEC. QuickLogic assumes no obligation to update any forward-looking statements or information which speaks as of the respective dates of any new information or future events. In today's call, we will be reporting non-GAAP financial measures. You may refer to the earnings release we issued today for a detailed reconciliation of our GAAP to non-GAAP results and other financial statements. We have also posted an updated financial table on our IR web page that provides current and historical non-GAAP data. Please note, QuickLogic uses its website, the company blog, corporate Twitter account, Facebook page and LinkedIn page as channels of distribution of information about its business. Such information may be deemed material information and QuickLogic may use these channels to comply with its disclosure obligations under Regulation FD. A copy of the prepared remarks made on today's call will be posted at QuickLogic's IR web page shortly after the conclusion of today's earnings call. I would now like to turn the call over to Brian.

Thank you, Jim. Good afternoon, everyone and thank you all for joining our third quarter fiscal 2021 financial results conference call. Our Q3 results were among the best QuickLogic has ever reported. Revenue of $3.9 million was the highest we have generated in six years and due to a higher mix of software and IP-related sales, non-GAAP gross margin was 73%, an all-time record for QuickLogic. We also made significant progress on our bottom line, with a non-GAAP net loss under $400,000, the lowest since Q4 of 2010. And when we include our outlook for Q4, which Anthony will provide a bit later, our revenue for the second half of fiscal 2021 alone will be almost the same as we reported for all of fiscal 2020. These results further validate that our transformation to a platform company focused on enabling more edge artificial intelligence is well underway. We are doing this by marrying our decades of expertise in programmable logic with the power, breadth and continually expanding open-source software and hardware ecosystems. I am very proud of the QuickLogic and SensiML teams for their amazing accomplishments and thank them for their dedication and efforts to get us to where we are today. Since we embarked on this new path forward nearly two years ago, our commitment to leveraging open source is fueling what I believe to be a once in a multi-decade opportunity to disrupt the mature FPGA market. QuickLogic has quickly established itself as one of the leaders in this fast-moving market. We are now at the tipping point for scaling this new approach more broadly, which is coinciding with accelerating market demand for embedded FPGA IP cores and FPGA devices that are supported by open-source tools. With our powerful combination of leading-edge products, growing customer and industry relationships and an increasing network of distribution partners, I am even more confident that we are beginning a long-term trajectory that will deliver higher revenue and earnings which should ultimately lead to improved shareholder value. Now, I want to move into some of the items that drove our third-quarter results and developments that will serve as the building blocks for our future success. First, let's start with a significant development that strengthened our financial position. At the end of September, two of our long-time shareholders approached me about making a strategic investment in the company. These holders recognize the tremendous opportunities ahead. The transaction was done at no market discount, raising a little over $1 million. The funding should ensure we have the capital to execute on our near-term growth objectives. We also announced our largest eFPGA contract ever, a $2 million design win. Part of this revenue was captured in Q3 with the remainder expected in Q4. This was an intense and lengthy process. The customer performed an extensive evaluation of several programmable logic companies. Ultimately, they chose QuickLogic because of our proven track record in delivering high-quality programmable logic devices, eFPGA IP and FPGA User Tools combined with our strategic QORC open-source initiatives. This is the first of what we believe will be several seven-digit opportunities, which makes us excited about the prospects for 2022 and beyond. Also in September, we formally announced the Australis eFPGA IP Generator which is the opening to what I believe is a new era of mass FPGA and embedded FPGA customization. The Australis Tool is going to be a game changer. The Australis Tool generates eFPGA IP in a highly automated way, including the implementation of customer-specific variants. The Tool is built with scale in mind, with the ability to generate an eFPGA IP core for a new foundry and process node within a few months and derivatives to currently supported foundry and process node combinations within weeks or even days. To be clear, we will use the Australis Tool to address multiple challenges and opportunities. Developers will be able to create eFPGA implementations for intellectual property protection, offloading and hardware acceleration of artificial intelligence or machine learning processes, or simply create a range of product variants for fragmented markets. Being able to do all of this quickly and with the flexibility to easily target the same node as the SoC means that these significant benefits come at a very low cost. We are already seeing the Australis Tool pay dividends. A few weeks ago, we announced our first customer success story in which we used the Australis Tool to generate a customized eFPGA IP for UMC's 22 nanometer process. More importantly, this was a new foundry and process combination for us and we were able to go from contract to IP delivery within only four months, substantially faster and with much less development cost than with our previous development methodology. The customer's motivations reflect many of the reasons we believe that using embedded FPGA technology for SoC applications is a smart technical and business decision. Being able to execute quickly and with the flexibility to easily target the same node as the SoC means that these significant benefits come with a very low cost and a very fast time-to-IP-delivery. We are seeing an increase in RFPs and RFQs for our eFPGA IP and this is exactly what the Australis Tool enables, leading to better market penetration and financial results for us in the coming years. Those are some of the key announcements we made since our last call. Now I want to offer some comments about what we are seeing near-term for our eFPGA business. We are currently working on several initiatives that have the potential to generate tens of millions of dollars in revenue over the next three years. Given the sensitivity of these programs and confidentiality restrictions we are bound to, we can't discuss companies or give granularity on applications. However, from a 50,000-foot level, let me cover the following. We recently signed a large, very near seven-figure, eFPGA-related contract for a process technology we have not targeted before. We will be using the Australis Tool to go from customer contract to IP delivery in less than two months, a record for us. We believe this will likely lead to a follow-on multi-million-dollar contract in 2022, with additional opportunities in future years. These types of opportunities would simply not have been possible a couple of years ago. Now, through our eFPGA initiatives, a growing presence with the Open-Source FPGA Foundation and an expanding toolbox of key products, we have the opportunity to bid on significant proposals and execute for revenue. Outside of our eFPGA business, we announced a strategic partnership with Rubidium Limited, a leader in voice recognition and always-on voice trigger software. We are providing Rubidium a complete voice recognition solution based on our very low power EOS S3 voice and sensor platform which they will combine with their own Voice User Interface software. This is very attractive for IoT edge applications, particularly those that are battery powered or lack cloud connectivity. Our SensiML business continues to gain traction. Recently, we announced that SensiML has teamed with onsemi, one of the semiconductor industry giants, enabling the development and integration of AI-based algorithms into their manufacturing, robotics, or predictive maintenance applications without needing to have expertise in data science or AI. The onsemi RSL10 Sensor Development Kit combined with the SensiML tools has produced a compact but sophisticated platform that's perfectly suited for driving next-generation Industry 4.0 solutions. This is a major win for SensiML. We once again expanded our distribution channels, signing a worldwide distribution agreement with Digi-Key Electronics. Our EOS S3 low power microcontrollers and PolarPro 3 low power FPGAs, all supported by 100% open-source software, as well as our dev kits are now available through that channel. This agreement is complementary to the agreement SensiML signed with Digi-Key earlier this year. Our partnership with Digi-Key is an important milestone in our global growth strategy and increasing our presence worldwide. Our smartphone-related sales came down a little as expected in the third quarter after a very strong Q2 and we expect them to come down a little further in Q4 as our smartphone customer prepares for their next smartphone launches. Despite that sequential drop for the year, we are proud to say that our smartphone revenue will be approximately 60% higher than the prior year. We ended the quarter in 10 phones including multiple 5G models. A new smartphone was just launched yesterday that includes our EOS S3 and we believe our lead smartphone customer will continue to use EOS S3 through 2022 and into at least 2023 on multiple models. With respect to the supply chain issues that have been discussed by many companies, our lead times have increased for the final assembly and test production. What used to be a six to eight-week turnaround is now stretching to six months or more. We are countering some of the delays by leveraging our inventories of substrates and finished materials. However, this issue is not going away anytime soon, so we may need to build additional inventory ahead of customer shipments to minimize risk. Finally, in our mature product segment, revenue declined as expected. Ongoing supply chain issues impacting our mature customers, particularly in the civilian aerospace market, in addition to the lingering effects of COVID-related business disruptions, continue to hold back revenue in this segment. Without good clarity it is difficult for us to see how mature revenue will be much different in the first half of fiscal 2022 than it will be in the second half of fiscal 2021. I know I have covered a lot of topics that will be instrumental in our ongoing business and financial improvement. Simply put, 2021 is proving to be the most pivotal time in QuickLogic's long history. It has not been easy and there may still be bumps in the road in the future. However, the financial results we are reporting today and the outlook we have for both the near-and long-term, are the proof points validating that our transition is succeeding.

Thank you, Brian and good afternoon to everyone joining us on today's call. As Brian mentioned, our revenue was the highest since the third quarter of fiscal 2015 and represents the successful progress QuickLogic is making on its business and product transformation. For the third quarter of fiscal 2021, revenue was $3.9 million. This compares with revenue of approximately $2.9 million in the second quarter of 2021 and $1.8 million in the third quarter of 2020. This reflects an increase of $2.1 million or approximately 117%, compared with the same quarter last year. Within Q3 revenue, sales of new products were approximately $2.8 million, the highest since Q3 2015. This compares with about $1.3 million last quarter and $639,000 in the third quarter of 2020. Our mature product revenue was approximately $1.1 million, compared with $1.6 million last quarter and $1.1 million in the third quarter of last year. In Q3, we had three customers who each accounted for 10% or more of our revenue. Non-GAAP gross margin in Q3 was 72.8%, which is an all-time record for QuickLogic. Product mix which included higher eFPGA and other services revenue were the main reasons for the improvements. The Q3 gross margin compares with 51.5% in the prior quarter and 53.9% in the same quarter of 2020. I should remind everyone that second quarter gross margin was primarily impacted by a write-down of raw materials of approximately $156,000. This caused a 5% reduction in gross margin. Nonetheless, you can see that gross margin was up substantially from the prior quarter. Non-GAAP operating expenses for Q3 were approximately $3.2 million. This compares with $3.3 million in Q2 and $2.6 million in the third quarter of last year. Within our Q3 operating expenses, R&D was approximately $1.5 million and SG&A was $1.7 million. This compares with R&D and SG&A of $1.6 million and $1.7 million respectively in Q2 and $1.3 million for both R&D and SG&A in the third quarter of last year. Non-GAAP net loss was $0.4 million, or a loss of $0.03 per share, based on 11.6 million shares. This compares with a net loss of $1.9 million, or $0.16 per share last quarter and a net loss of $1.7 million, or $0.15 per share in the third quarter of last year. The total cash at the end of Q3 was $19.6 million, this compared with $19.0 million at the end of last quarter. Included in the total cash was a net of approximately $1 million received from the direct placement. The cash balance also includes the $15 million draw from the revolving line of credit. Now, moving to our guidance for the fourth quarter of fiscal 2021 which will end on January 2, 2022. The revenue guidance for Q4 is $3.9 million, plus or minus 15%. We believe total revenue in Q4 will be comprised of approximately $3 million for new products which would be the highest since Q2 of 2015. Mature product revenue is forecasted to be approximately $900,000. This midpoint of guidance, combined with the results from the first three quarters, would translate into annual revenue growing 50% above fiscal 2021, consistent with our previous estimates. Based on the expected revenue mix, non-GAAP gross margin for the quarter will be approximately 64%, plus or minus 5%. At the midpoint, this will result in annual non-GAAP gross margin of 62%, consistent with what we have discussed throughout the year. For comparison purposes, non-GAAP gross margin in fiscal 2020 was approximately 51%. Additionally, the expected decrease in gross margin in Q4 versus Q3 is primarily related to the reclassification of non-recurring engineering expenses to cost of sales in connection with our new eFPGA contracts. Our non-GAAP operating expenses will be approximately $3.3 million, plus or minus $300,000. At the midpoint of the range, we expect R&D expenses to be approximately $1.6 million and SG&A expenses to be approximately $1.7 million. As Brian mentioned earlier, with the pipeline of business we see for 2022, we would expect quarterly OpEx to tick up between $200,000 to $300,000 from Q4 levels in order to support the anticipated growth. Just a reminder that the first quarter of each fiscal year is generally a higher spend quarter due to the normal beginning of the year expenses. After interest expense, other income and taxes, we currently forecast our non-GAAP net loss will be approximately $900,000, or a net loss of $0.08 per share, based on roughly 11.8 million shares outstanding. Most of the difference between our GAAP and non-GAAP results is our stock-based compensation expense. In Q4, we expect that our stock-based compensation will be similar to Q3. There will be movement in our stock-based compensation over the course of the year and it could vary each quarter based on the timing of grants and estimates related to performance-related awards. For the balance sheet, in Q4 we expect cash usage to be consistent with Q3, in the range of $500,000 and $700,000.

Thank you, Anthony. Before sharing my closing remarks, I would like to offer a warm welcome to Radhika Krishnan to our Board of Directors. As we announced this morning, Radhika is currently serving as the Chief Product Officer and General Manager at Hitachi Vantara where she is responsible for numerous functions across all product lines. This includes the industry-leading Lumada SaaS portfolio targeting data management, analytics, AI/ML and Industrial IoT market segments. Radhika brings a strong background in software and hardware and I believe she will have an immediate impact on our AI/ML growth strategy for our SensiML AI Software and eFPGA IP products. In closing, I have been a part of the QuickLogic team for more than two decades. At no other time have I or many of our long-term team members been this excited about the future prospects for the company. Customer interest in our new technologies is accelerating, distribution partnerships are expanding our reach and our financial position is as strong as we have seen in many years. Our sales funnel is strong and growing and we are exiting this year with more signed IP-related deals than ever before. SensiML has expanded its partnership ecosystem to support nearly all of the top microcontroller companies. Our go-to-market strategy has been and will continue to be focused on products that can generate revenue faster, with higher gross margin and with a high return on investment. With this being the final earnings call this calendar year, I wanted to offer a little more insight into our current thoughts for fiscal 2022. Our pipeline of what I would call winnable opportunities is accelerating and we continue to balance this knowing that not all of these opportunities will pan out. That said, I can see a pathway for annual revenue in 2022 to grow at the same percentage, if not more, than the growth we foresee in fiscal 2021 over fiscal 2020. At the same time, with an expected higher mix of software and IP-related sales next year, our gross margin could climb into the mid to high 60% range. While operating expenses will grow modestly to support the new customer design wins, we should be on track to reach profitability in the first half of 2022. It has been several years since we have been able to deliver such positive news and a bright outlook. I want to thank our long-time investors, customers, suppliers, and most of all, the QuickLogic team for their continued support and trust. This is a new era for QuickLogic and our future could not be brighter. That completes our prepared remarks. Operator, I would now like to open the call for questions.

At this time, we will be conducting a question-and-answer session. Our first question is from Suji Desilva with ROTH Capital. Please proceed with your questions.

Hi Brian, Hi Anthony. Congratulations on the progress here.

Thank you.

Yes. So, the gross margin guide down because you're going to move NREs into COGS. Does that relate to that? It sounds like you had a deal where the Australis is going to allow you to hit a new node you haven't hit before and the rev rec causes that to be delayed until that's available? Is that all part and parcel of the same story?

Some of the operating expenses, normally that would have been in R&D that we're moving up to COGS for the brand new one that I just talked about. There's some things that we've got to move into that specific to that deal for this quarter. So that's why you're seeing some of that move up there in the lower gross margin.

Okay. So for the deal where you're trying to get a node ready for a customer for eFPGA, is the rev rec such that you wait till that's all available and then that revenue rec as opposed to when you've now initiated the work for that customer?

These are typically milestone-based license agreements, Suji. So typically, they're recognized fully from a revenue point of view when we deliver all the obligations for that. That could be a straight license for an IP that we already have or if there's some work involved needed to prepare that for delivery, then we have to match those expenses with the revenue from the IP license. So that's why you see that coming up periodically in Q4 for this.

Okay, so regarding milestone-based agreements. In terms of the eFPGA pipeline, how can you assure the investors on the call that the $2 million customer is not just a one-time occurrence and that there are more similar customers in the pipeline? A lot of effort was invested in securing that first $2 million customer, so it would be helpful to understand why you are confident that additional customers will come in rather than facing delays with future ones.

The short answer is that for Q4, we are set to close and deliver a new IP license approaching seven digits this quarter. This is a follow-on from the large $2 million license we announced a couple of months ago. Additionally, in my prepared remarks, I mentioned several other significant opportunities that we are actively pursuing. The number of RFPs and RFQs is increasing, especially for the larger ones. The transition from announcing the $2 million deal to now discussing one close to seven figures that we can actually finalize and deliver this quarter is impressive. This should provide investors not only with reassurance but also excitement about the numerous opportunities we have and can secure for 2022.

Excellent. Appreciate that clarification, Brian. And then as I look at the competitive landscape and how you've won some of these eFPGA deals, among the other things, you talked about the tools and all that, is QuickLogic's heritage in eFPGA giving it a more robust roadmap that might be exciting these customers along with the other elements? I'm curious if that's a factor here.

Yes, I believe there are two questions in your inquiry, Suji. First, I have the advantage of meeting directly with management, providing them with data that highlights our 30 years of experience shipping devices. Every time they board an airplane, the flight control and avionics systems are likely powered by our technology. This history assures them of our expertise in quality, reliability, and manufacturability at scale, which sets us apart from VC-backed startups that can't match our intellectual property. Additionally, I can reference companies that have licensed our technology for radiation-tolerant devices currently in space, further demonstrating our capabilities in quality and reliability. This heritage gives us significant credibility in these deals. The second point touches on the fact that we are a device company, which leads to other discussions. The ongoing supply chain challenges have highlighted the difficulties many companies face in sourcing parts and delivering their products. This situation prompts them to reconsider their supply chains and whether to take more control by potentially developing their own devices. As a result, this creates new opportunities for our eFPGA business, as companies may view us as a provider of device-related services or intellectual property, which makes us somewhat unique in this space.

Okay. One last question, then I'll jump back in the queue. I know you're being cautious about speaking about these eFPGA customers, the licensing customers, but I'm trying to get any flavor or color on this. What end markets maybe are the most interested? If that is a way to think about this in terms of your wins that are driving some of this interest or if you want to answer it differently, maybe you have the Google Open Source Community, you have the DARPA partnership and all that. Which of those may be are being the most productive near-term and getting you leads that are closing?

I think in the near term and if you look at our heritage business here. So today, we sell to five of the top five, eight of the top 10 DoD primes already. And you can see that we got into the DARPA toolbox at the beginning of the year. So I think that segment, it uses a lot of eFPGAs. We have a really good reputation in that space. I can imagine that would be one of the early markets that we start to see a lot of the success here. That being said, that $2 million contract is not in that space. So we are seeing diversity in space that $2 million our contract is more for what I would classify as the general industrial instrumentation and test space that's also out there. So we have good diversity right now already with our IP contracts.

Excellent color, Brian. Congratulations again, guys. Thanks.

Thanks, Suji. Thanks.

Our next question is from Rick Neaton with Rivershore Investment Research. Please proceed with your question.

Thank you. Thank you, Brian, and congratulations on the quarter and the guidance for the fourth quarter. I'd like to talk about SensiML a bit. You've announced a lot of partnerships and joint marketing efforts. Are you seeing any early trends of customers of these microcontroller OEMs trying out SensiML using it or buying it? And if so, in what types of use cases and how frequently are they doing it?

Well, the reception from these microcontroller partners has been really positive, especially, I would say, the last three that we've brought on board, they have been very active in terms of integrating SensiML into the sales and marketing outreach that these companies are doing in terms of seminars, webinars, etc. The last three being microchip, silicon labs and onsemi. Those have resulted in immediate opportunities coming in. Especially if you think about the more we get the application engineering groups trained at these microcontroller companies, they can really be spokespeople out to the customer base as they're looking to solve problems. So we have seen immediate opportunities coming in, not just for the lower tier, less expensive version but we actually have signed contracts with customers now that are noteworthy names that you would recognize to implement AI for their systems. And so we're going through those sort of development phases now with the customers. And I think that speaks for all of the future. The more that these other companies really get familiar with the tools and see how they can solve problems, the more opportunities we're going to get. So we're really pushing hard on these most recent three. And I will say, from a revenue point of view, we don't break out SensiML yet as a percentage of revenue because it's not material. But I think our internal forecast for Q4 or Q3 is to double revenue quarter-on-quarter for SensiML. I'm not going to give you the absolute number but I can show that there is progress there in terms of growth and it is really coming from these new microcontroller partners.

Yesterday at its Investor Day, Qualcomm gave a very bullish outlook for its edge semiconductor business through the next three or four of its fiscal years ending in 2024 and most of its growth coming from industrial and automotive applications. Are you seeing increased interest through your open source eFPGA in areas like industrial and higher-use cases than just small battery-powered edge devices that might not have access to power?

Yes. I think we are seeing opportunity for that. In fact, I would venture a guess that related revenue we have right now, the wins that we've talked about, none of them are battery powered. They are power sensitive, but they're not battery powered which is the traditional sort of wheelhouse of eFPGAs, if you just step back and look at the general market. But yes, I'm glad to hear Qualcomm on that side. I think that I talk with a lot of investors and they'll say, when will be the edge computing really going to be here, not just on People's PowerPoint, but I think if Qualcomm is going out there and saying it, there's probably something there. And I think we're going to be right there with the fact that we have the eFPGA which is good for embedded FPGA applications and we have SensiML which is great for adding some intelligent software to those same systems.

Okay. Thank you, Brian. I appreciate the color on where you see your business heading. Thanks.

Thank you, Rick.

Our next question is from Richard Shannon with Craig-Hallum. Please proceed with your question.

Well, thanks Brian for taking my questions. Apologies if there's some allowed ambient noise in the airport here, also wearing a mask; so, if you can't hear me just tell me. Sorry about that.

No problem.

First, just a quick question. Your fourth quarter sales number for the guidance, did I hear that right at $4.8 million?

No, not $4.8 million, $3.9 million.

$3.9 million. I apologize for the technical difficulties. That's helpful. Last quarter, you mentioned your strategic initiative announced in February that hadn't been funded. I didn't hear any comments in your prepared remarks. I'm assuming that's still the case. Can you provide more details about the status or any updates? That would be appreciated.

Yes, definitely still working on it. I've actually been in discussion with them probably every other week since February. And they're still trying to pull that funding together to get that thing closed. But we're definitely still actively discussing with them and sort of modifying our approach with it, the technical specs and so on but it has not closed yet. I feel active.

Okay. Next question, you talked about growth in 2022, equal to or perhaps higher than what you're forecasting at the midpoint implied for your sales guide this quarter. Can you kind of talk about some of the drivers here where you're going to see more growth? I think we can all guess but I'd love to get your characterization of where that growth comes from?

Yes. As mentioned in our prepared remarks, for the first half of the year, we expect flat performance compared to the second half of 2021 on the mature side. There should be growth in the EOS S3 due to its continued usage in smartphones, which I highlighted will continue through 2023. Additionally, we anticipate wins in the industrial, IoT, and consumer markets. We expect an increase in SensiML through our microcontroller partners, aiming to eventually break it out as a separate business, which could contribute 10% or more to our revenue. Furthermore, a significant driver for next year will be the eFPGA IP and associated services, likely becoming our largest segment.

Okay, great. Moving on to my next question about the pipeline, you mentioned it being in the tens of millions of dollars. I believe you indicated that many of these deals could start off as seven-figure agreements, likely on the lower end of that range. Can we simplify this by estimating around $1 million per deal? If that's the case, then tens of millions would suggest there are several to quite a few of these deals in the pipeline. Is that an accurate way to interpret the situation?

I said it's less than a dozen but I would tick up the value per opportunity to be more than just $1 million, a few million, perhaps, or a couple of million each.

Okay. All right. I guess, probably my last question here is how to think about the dynamics here that got you to the recent embedded eFPGA license $2 million one. And I think you're attributing a good deal of success to the Australis tool. I understand this was, to some degree, developed with an academic partner. And you said there's a competitive situation where there's a deep evaluation of other competitors. Can other competitors use this tool here? And does that limit your competitive advantage or can you just kind of discuss those dynamics?

Yes. I want to be careful not to reveal too much about our competitive position during this call. However, I can share that Australis is based on a project at the University of Utah called OpenFPGA, which was part of a DARPA-funded program. The enhancements we are adding on top of this open-source academic tool are significant. This relates to why customers choose QuickLogic. To draw a parallel with software, consider Linux, which is open source and available for anyone to download and use for free in a hobbyist context. Yet, companies are not going to risk their careers or products on something easily downloadable from GitHub. They prefer to partner with a company that provides a product with a solid support strategy built on open-source foundations. This is precisely our approach with the OpenFPGA and Australis platform. We aim to be the Red Hat for open-source FPGAs. While some open-source technology exists that aids automation, it does not replace the quality, reliability, and die size optimization that a commercial product offers, backed by a supporting entity. That’s the advantage of our three decades of experience at QuickLogic. Other FPGA companies could certainly adopt open-source methods, but they would have to undergo the two-year learning process we just completed. Remember, Australis did not come together overnight; it has been under development for nearly two years. We only recently felt ready to launch it commercially, confident in its performance for our customers. It was a challenging journey to reach this point, and anyone aiming to use it commercially will face the same learning curve. We have established a strong initial competitive advantage, and we are committed to further developing Australis with additional features that will not be open source.

Okay, that's excellent. Excellent points here, Brian. Thank you very much. I think that's all my questions. So, I'll just out of the line. Congratulations on a great end of the year.

Thanks, Richard. Appreciate it.

Our next question is from Martin Yang with Oppenheimer & Co. Please proceed with your question.

All right. Good afternoon, Brian and Anthony.

Hey, Martin.

My first question is on wafer purchase commitment. That number has been consistent growing and was quite large comparing on a year-over-year basis. Can you maybe help us understand what does it mean for your business or does it say about the market supply/demand or customer engagement?

So as I said in the prepared remarks, Martin, with the supply chain, the way it is, it really behooves us to make sure that we are buying ahead of the actual shipment that we would normally be doing because we just can't handle any disruptions in the supply chain that are worse than what they already are. So we are working with our customers to give them longer lead times that they have to abide by, so that we can go off with some confidence and go to the foundries and the assembly houses and get to, a, get the allocation for next year and the following year. And then, b, get the wafer starts when we need them. So we're managing that. And as I said, you may see some uptick in inventory, in fact, because we want to just have a little bit of buffer to make sure that we can make sure that we ship product to customers that need it. It's probably no different than the semiconductor companies are doing right now.

Yes, it makes sense. My next question is on Australis. You talked about this platform is very useful to facilitate designs on new foundries and new processes. How even way does it help with the customers that are implemented for older or more familiar processes?

So it can help in the sense that if a customer comes to us and they say, hey, I would like an eFPGA IP core on XYZ process node at ABC foundry, we can do that within about a quarter from the time that we get access to the PDK. And I know right now, there's a huge supply chain crunch, just especially on the mature node. So we can handle basically any of those requests in a very timely manner. So it gives a lot of options for customers. To be clear, QuickLogic is the one that runs the Australis tool. We don't give that to customers. There's a lot of nuance into how that works. But we effectively work with the customer and what they need. We work with the foundries to get the libraries that we need and then we can create the course that the customer wants and deliver that to them along with, by the way, the eFPGA user tools support that they would ultimately need to program that eFPGA.

Most of my questions have been asked before. But last thing I want to double-check is that you do expect the licensing and software revenue as a percentage of total revenue to be higher in 2022 over '21?

Yes, we do.

Okay, got it. Thanks.

No problem. Any other questions, Martin?

That's it. That's it from me.

Okay, great.

We have reached the end of the question-and-answer session and I will now turn the call over to Mr. Brian Faith for closing remarks.

Thanks, operator. Thank you for participating in today's call and your continued support. We look forward to speaking with many of you, again, when we participate in upcoming investor events. And again, when we report our fourth quarter fiscal year 2021 results. Have a great day.

This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.