QUICKLOGIC Corp (QUIK) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good afternoon. At this time, I would like to welcome everyone to Quick Logging Corporation's second quarter fiscal 2026 earnings results conference call. As a reminder, today's call is being recorded for replay purposes. I would now like to turn the conference over to Ms. Allison Wigler of Darrow Associates. Ms. Wigler, you may begin.

Thank you, Operator, and thank you to all of you for joining us. Our speakers today are Brian Faith, President and Chief Executive Officer, and Elias Nader, Senior Vice President and Chief Executive Officer. As a reminder, some of the comments QuickLogic makes today are forward-looking statements that involve risks and uncertainties, including statements regarding our future profitability, revenue growth and cash flows, expectations regarding our future business, and statements regarding the timing, milestones, and payments related to our government contracts, statements regarding expected contracts and the expected magnitude of such contracts, and statements regarding expected adoption rates and or orders by our customers. Actual results may differ due to a variety of factors, including delays in the market acceptance of the company's new product, the ability to convert design opportunities into customer revenue, our ability to replace revenue from end-of-life products, the level and timing of customer design activity, the market acceptance of our customers' products, the risk that new orders may not result in future revenues, our ability to introduce and produce new products based on advanced wafer technology on a timely basis, our ability to adequately market the low-power competitive pricing and short time to market of our new products, intense competition by competitors, our ability to hire and retain qualified personnel, changes in product demand or supply, general economic conditions, political events, international trade disputes, national disasters, and other business interruptions that could disrupt supply or delivery of or demand for the company's products, and changes in tax rates and exposure to additional tax liabilities. For more detailed discussions on the risk uncertainties and assumptions that could result in these differences, please refer to the risk factors discussed in Qlik Logic's most recently filed periodic reports with the SEC. But GLOGIC assumes no obligation to update any forward-looking statements or information which speak 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 and non-GAAP results and other financial statements. We have also posted an updated financial table on our IR webpage 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 SD. A copy of the prepared remark made on today's call will be posted on QuickLogic's IR webpage shortly after the conclusion of today's earnings. And now I'd like to turn the call over to Brian.

Thank you, Allison. Good afternoon, everyone, and thank you all for joining our second quarter 2026 conference. Our last conference call, we have made significant progress towards achieving our 2026 goals and have narrowed our full-year growth outlook to a range of 70 continuing to model non-GAAP proposition to contributions from Storefront and RADPRO. We anticipate our second-half growth will be driven in part by new customers and new market sector applications. Good potential to sign an EFPGA IP architectural license late this year. 2026 is on target to be a very successful year for QuickLogic, and our accomplishments are positioning us well to continue our growth and market penetration trends in 2027. And before I go into what has elevated our confidence in full year 2026 revenue growth, let's take a moment to touch on what weighed on Q2 and why we will guide for flat revenue in Q3. We anticipated finalizing a seven-figure extension of an existing customer contract in late Q2. This extension was forecasted to be recognized in Q2 and Q3. The contract extension has been delayed as the customer is re-evaluating what functions it wants to put in embedded FPGA versus the functions that will be locked down in the fixed portion of its ASIC prior to finalizing the design. The reason why Q2 revenue is at the low end of our guidance range contract extension, but this delay removes it from our 2026 forecast. Removing a commercial ASIC design targeting Intel 18A from our second half 2026 forecast. A lot of uncertainties involving this design arose recently. And in the best-case scenario, the EFPGA hard IP contract for this ASIC will be a 2027 opportunity. These two changes lead us to forecast flat revenue for Q3. The value of contracts and orders that we have on the books and the progress we are realizing in other areas gives us the confidence to raise the low. The foundation of our anticipated Q4 growth is our ongoing contract with the U.S. government, which was increased last year to a total ceiling value of $89 million. The contract will contribute a significant percentage of total. In addition to this, we have a sound base of mature product already on the book scheduled to receive and deliver orders for us. We expect this trend to continue, and with a number of evaluations already underway, we'll see initial storefront device demand. Continuing our work on what we discussed in our last conference call. This includes the receipt of discrete FPGA test chips that we taped out for the contract with a $2.7 million ceiling value that we announced. Many of this contract chips that we will characterize and include in a new 12-hour kit will be compatible with common third-party development environments used by both FIB and commercial to accelerate evaluations of discrete. We can provide a storefront. Beyond these scheduled contributions is an anticipated expansion of our 1 million LUT contract to target Intel 18-A-P contracts with new customers I mentioned earlier. Customer design activity in Intel 18-A has shifted to Intel 18-A-P. Intel 18-A-P is capable of delivering over 9% higher performance at isotropic power, 18% lower power work we completed for Intel 18-A. The time and cost to develop EFPGA hard IP for Intel 18-AP will be de minimis. The customer that funded our $1 million less developments in Intel 18-A for an Intel 18-AP implementation that we are targeting for Q4. We're working with some customers on Intel 18-A designs, but we expect most will transition to Intel 18-AP, and that all 18-AP will likely accelerate design activity, And with that, closely with several new customers on ASIC designs that target the incorporation of our EFPGA hard IP. Two of these potential contracts is a design targeting automotive, industrial automation, and robotic applications. Feasibility study contract to evaluate our EFPGA IP for a particular use case. Leaded the contract, and the customer is now investigating if a custom implementation, the initial results look promising, and if successful, this will lead to an ESPGA IP architectural license. Devices leveraged one-time programmable anti-fuse technology. This is the highly reliable technology used and mature products we have been supplying to defense and aerospace contractors for decades. Beyond the ongoing domain, recently been designed into new person, DIVs have shown an interest in our existing devices in smaller packages than we currently offer. They've contracted with us to fund and qualify this smaller package for new designs. This opportunity suggests it could become a new multi-million dollar market for QuickLogic, ongoing operational investment. Other DIVs and aerospace companies to fully leverage this opportunity. Our digital proof-of-concept strategy is a very cost-effective way for both QuickLogic and prospective chiplet customers. Both that include chiplets, Intel 18A and Intel 18AP. As I mentioned earlier, we'll enhance these efforts by enabling customers to rapidly move beyond software simulations, these, and other proposals on chiplet revenue beginning in 2027. of financial data was 5.5 million.

This was 48.7% from Q2 2025 and up 8.5% from Q1 2026. The addition of an existing contract that Brian previously discussed, this was below the midpoint of our guidance. Product revenue in Q2 was 4.7 million and mature product revenue was 0.8 million, 9.7% from Q2 2025, 1.2026, 2.9% from Q2 2025 and up 81.2026, 36.8%. This was above the midpoint of a 42% outlook and a significant increase over a reported 31% in Q2 2025, 6% in Q1 2026. The expenses in Q2 were approximately $3.5 million between OPEX and 3 above our $3.3 million outlook. $2.5 million in Q2 2025 and $3.2 million in Q1 2026. The gap net loss was $1.1 million or loss of $0.06 per share. It compares to a non-GAAP net loss of $1.5 million or loss of $0.09 per share in Q2 2025. A non-GAAP net loss of $1.3 million or loss of $0.08 per share of fiscal between a GAAP and non-GAAP result is related to non-cash stock-based compensation expenses and a removal of a significant non-recording gain. Compensation for Q2 was $753,000 compared to Outlook of $900,000. Stock-based compensation was $843,000 in Q2 2025 and $858,000 in Q1 2026, which were $0 in Q2 2026 compared to $300,000 in Q2 2025 and $0 in Q1 2026. In Q2 2025, Q1 2026, one recurring gain of $950,000, two dead in a gap results in Q2 2026, Q2 2025 of total revenue. $5 million drawdown from our line of credit, net cash was $13.5 million, with a projection of slightly less than $12 million, and with $3.8 million in net cash, we reported that the close of Q4 2025. This increase of $9.7 million in net cash through the first half of fiscal 2026 is inclusive of $9.8 million raised with our ATM. There is an outlook for our third fiscal quarter which will end on September 27, 2026. Based on backlog and customer forecast, our total revenue guidance for Q3 is $5.5 million, plus or minus 10%. It will be comprised of $4.7 million in new product revenue, $4.8 million in mature product revenue. We anticipated an increase in second half mature revenue. On current forecast, we are now estimating full year 2026 mature revenue will be flat with 2025, but approximately 3.3 million. Based on the anticipated Q3 revenue mix non-GAAP gross margin for the third quarter is expected to be approximately 47% plus or minus 5% profit margin of approximately 51% you need to classify certain expenses are related to labor and tooling for IP contracts this may cause variability in our quarterly gross margins and operating expenses that will usually balance out on the operating If the non-GAAP operating expenses are expected to be approximately $3.6 million, the abilities and allocations of R&D costs between OPEX and COGS and new hires, we are raising our full-year outlook for non-GAAP OPEX to a range of $13.7 million to $13.9 million. Approximately 17% in non-GAAP OPEX over 2025 as compared to our outlook for 70% to 80% and revenue growth in 2026, inherent leverage of our business model. Rest and other income, we're forecasting a Q3 net loss of about $900,000, or a loss of approximately $0.05 per share. Based on our current outlook, we still anticipate non-GAAP profitability for the second half of 2026. Transmission on GAAP and non-GAAP results is related to non-cash stock-based compensation expenses. In Q3, we expect this composition will be approximately 900,000, compares to 828,000 in Q3 2025 and 753,000 in Q2 2026. There will be movement in the stock-based composition during the year, and it may vary quarter to quarter based on the timing of grants, use of approximately 400,000, close Q3 with a debt cash balance that is slightly over $13 million. Please note that our cash use could vary based on the timing of certain payments and receipts from contracts during the quarter. Based on our current outlook, we anticipate positive cash flow during the second half of 3026. For your time, I will now turn the call over to Brian for his closing comments.

26 is shaping up to be a very good year for quick watching. Based on contracts and orders we have in the books and the status of our negotiations on a couple of new contracts, we have narrowed our full-year growth outlook to 70% to 80%. Modeling non-GAAP profitability and cash flow-positive operations for the second half of 2026. As important as this is, I want to emphasize in parallel, we have laid the groundwork for continued growth and profitability in 2027 and beyond. We completed tape-outs in 2027. The first was completed, and we are scheduled to receive an allotment of test chips that we will incorporate in a 12-OP eval kit. This will help our customers accelerate evaluations, and we believe will lead to new designs that we can storefront as either discrete devices or other chiplet opportunities in the works that we believe will lead to new contracts and storefront orders beginning in the late tour cave-out schedule for late 2026. In one case, we will have access to enough devices to support initial production orders that we can supply through our storefront initiative beginning in 2027. Pro eval kit. And anticipate new orders through the second half of 2026. beginning in 2027, ESPGA IP architectural license in 2026, customer as it develops the device targeting its proprietary fabrication process in 2027, mature products, and have been awarded a contract to qualify a new small package option. We believe this will open a multi-million dollar opportunity to expand in new designs beginning in 2027. These many accomplishments, I am hopeful you can share my pride in the extraordinary execution by the Quick Project team and my high level of optimism and I will now open the call for questions.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for a participant choosing speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Neil Young with Needham and Company. Please proceed.

Everyone, thanks for letting me ask a question. So, just looking at the rest of the year, it looks like 4Q is now carrying much of, you know, sort of the full-year growth story. I guess, you know, just doubling down on that sort of what's your confidence level on timing risk? You know, is any of that revenue recognition contingent on milestones or deliverables that could possibly pass, flip past 4Q into 27? And then I have one more.

And engineering teams to make sure that those are available and prioritizing the work that is related to revenue recognition. So we've looked at these contracts and when we would need to make delivery of these items and we are now so that we can get those milestones with these contracts in order to make that happen. that's more on the business side as opposed to contract versus.

Okay, thanks. And then my other question, if I heard you were talking about most customers are planning the transition from Intel 18A to 18AP, and the porting cost will be, you know, de minimis given existing dev work. So I guess practically, you know, does that mean any revenue from active Intel 18A engagements, you know, could get delayed while customers are waiting to redesign for 18AP? or does, you know, the existing 18a work carry forward unaffected? Anything you can offer there?

Time effective for us, meaning that we could have the revenue targets if we get new contracts on the automation with Astralis in order to, in a timely fashion. I do think there's a lot of investment that's happened in the ecosystem in general around Intel 18a, not PEAT, use of that chip design before they kick over. Because you can imagine that in ecosystem in general, So everybody has to have certain things done on 18-AP or chip designs to move that direction. I'm talking about all the different IP that you might be integrating into that. In addition for some...

Thank you. Our next question is from Tyler Burmeister with Lake Street Capital Markets. Please proceed.

Good quarter and congrats on the narrowed full year guidance there. I guess maybe first I'll go to the DevKit customers, you know, is there any way to quantify, I guess, how many of those you think, I guess, I think your account was moved to storefront revenue next year. I guess, any way to quantify that or think about the number there would be great.

Related to programs I'm not really allowed to talk about, but what I can say is the, I think to engage with, in some cases, they already have dev kits, those dev kits, as far as like how many or what percent, I won't go into, but they will lead to storefront.

Understood. All right. Sorry to keep asking questions about programs like this, maybe another way. You previously bracketed the strategic grantor opportunity in total, I think, at 10 to 20 sockets across multiple programs. So I'm wondering if, you know, as you've got these dev kits now in the customer's hands, you've had continued conversations with those customers, if you've maybe seen any change that opportunity set, if that opportunity set got larger, if these conversations maybe affirm that opportunity set up. I guess any color that you can give on maybe that would be interesting.

I guess the way I'd say it is that we are engaged with more. That has expanded, which is a good thing, has expanded even from now until the end I wish I could give more color on these things, but with respect to non-disclosure agreements for these types of programs.

No, completely understand. Sorry to put you on the spot like that, but appreciate the color. That's all for me, guys.

Our next question is from Gus Richard, Northlane Capital. Please proceed.

Yes, thanks for taking the questions. Just on the Radhard contract, just could you update us on how much you have left? and when do you expect the next launch?

At the year.

Got it. That's helpful. And then on the EFPGA, I think it sounds like one contract was delayed. They're not sure what they want hard and what they want to be Gatorade. Do you have any sense on how much revenue you expect over the next couple of quarters from eFPGA licenses?

Support work, the NRE work that goes from the U.S. government, so we don't break it down into, I guess, a level that you're asking about necessarily. We have, you know, a few that we're executing on right now that are already signed. I mentioned that in the script itself that we're operating on ones we've already signed, and then we have a few that are in late-stage negotiations. The ones that we're in late-stage negotiations on in order to meet the revenue growth start between 70% and 80%. So that's why we're feeling good about that number. And looked at for their applications wanting to go to a more advanced process mode. And when they go to a more advanced process mode, that's why it would be an extension to a current customer and why it would kick up further revenue for QuickLogic. And to something I could understand why they wanted to do sort of a more detailed analysis of what should go into the EFPGA and what should go into the hard logic because moving to any more of these advanced process notes is cost for them.

Yeah, and just to be clear on the EFPGA revenue, we throw out an $8 million number, is that just for the second half or is that for the full year?

Second half, so that's inclusive of what we're doing on our government side too because that's one bucket of revenue for us.

Okay, got it. All right, thanks so much.

Our next question is from Richard Shannon with Cricallum Capital Group. Please proceed.

Well, hi, Brian and Elias. Thanks for taking my questions as well. How are you guys doing? Let's ask what on the sales guide for the year. So, the midpoint's the same as you had before here, and we've had a notable contractor move out to 27. So, you must have picked up some business or at least increased confidence in some other business here. Can you help us understand the dynamics that led to the midpoint that hasn't changed here? Okay, fair enough. I want to follow up on an earlier question. I think it was from Tyler about storefront for next year. I think his question was kind of, you know, looking more at the RAD Pro product line here, but wondering to the degree to which you're going to see storefront revenues outside of that, can you elaborate on product customers' applications and any thought on the scale of the storefront revenues for next year?

We have to have a chip that we're planning to be taping out by the end of the year. On top of that, NRFS is a Crestor proposal or a Crestor solution from different government channels. It's a significant outtick, actually. We've been doing the beginning, but...

Yeah, that was pretty helpful. Maybe just a couple more for me and I'll jump out of line here. On the RAD Pro products here, I want to get any sort of feedback you're getting from customers who have already taken dev kits, and is the timeframe they're hoping for decisions from some of those lead customers, I think you're kind of talking about kind of end of the year, early next year sort of timeframe, is that still holding from what you understand?

Yeah, again, I can't go into a lot of support sites. So besides that, like I said, we've actually been exposed to even more groups within these customers that we weren't talking to being beyond the end.

That sounds great. My last question, I'll jump in the line here. Any chance you're going to tell us the percentage of sales from the 10% customers in the second quarter? I'll wait for that one. That is all from you guys.

As a reminder, just star one on your telephone keypad if you would like to ask a question. Our next question is from Ruth Neaton with Rivershore Investment Research. Please proceed.

Thank you. Hi, Brian. Hi, Elias. I'm not going to ask you any more questions about how sure are you about your outlook for the year. I have kind of an off-the-wall question about post-quantum cryptography and how EFPGAs fit into that, given your little demonstration project you're running with the company out of Florida Atlantic on that. And is that defense-related? Is that non-defense-related? and how does an EFPGA fit into like a preemption for quantum computing and what's the time frame on that?

Not limited to just defense, but they're into defense. But really you could think about anything with respect to something that's a target. It could be a defense system. It could be a satellite communication system. And so now they're looking at, well, how do I, PQA is something that people are looking at. And, unfortunately, those algorithms are not, like, and so whenever you hear about something that's a big desire for these people.

Yeah, it does. Thank you for that explanation. One follow-up on that. Is your relationship with PQ Secure similar to the relationship you have or had at VTH in Zurich when you develop the Arnold chip as kind of a demonstration project, or is this the first step toward a commercial product?

I think this is similar because it's the beginning stages of a trend, right, deployment, but I think that the big difference now is that these are actual companies that we're working with, it's not a research, I would say, closer in solving real problems and generating real revenue for low power proof of concept it did generate

interest but I think what we're seeing now is there's going to be more definitive interest that's okay thank you for all that detail Brian and thanks for having me on the call there are no further questions at this time I would like to turn the call back over to Brian for closing comments Boston Eastern

Thank you, this will conclude today's conference. You may disconnect at this time and thank you for your participation.