QuickLogic Corporation is a fabless semiconductor company that provides innovative, programmable silicon and software platforms to enable its customers to develop custom hardware products in a fast time-to-market and cost-effective way. The company's product offerings include embedded FPGA (eFPGA) intellectual property (IP), low-power, multi-core semiconductor system-on-chips (SoCs), discrete FPGAs, and AI software.

Business Overview

QuickLogic's customers can use its eFPGA IP for hardware acceleration and pre-processing in their Application Specific Integrated Circuit (ASIC) products, the company's SoCs to run its customers' software and build their hardware around, and the company's discrete FPGAs to implement their custom functionality. The Analytics Toolkit from SensiML Corporation, QuickLogic's wholly-owned subsidiary, provides an end-to-end Artificial Intelligence / Machine Learning solution with accurate sensor algorithms using AI technology.

Product Portfolio

The company's new products include eFPGA IP licensing and associated professional services, as well as its silicon products consisting of EOS, QuickAI, ArcticLink, and PolarPro. In addition, the company's new products category includes its AI/ML Software Platform from SensiML, which includes Software as a Service (SaaS) subscriptions, per-unit license fees, and proof-of-concept services. QuickLogic's mature products include primarily FPGA families named PASIC and QuickRAM, as well as programming hardware and design software.

Financials

In the first quarter of 2023, QuickLogic generated total revenue of $6.0 million, a decrease of 20% compared to the prior quarter, but an increase of 45% compared to the same quarter last year. The company's new product revenue in the first quarter was $4.9 million, a decrease of 29% from the prior quarter but an increase of 60% from the first quarter of 2022. Mature product revenue was $1.1 million in the first quarter of 2023, an increase of 73% compared to the prior quarter and an increase of 5% compared to the first quarter of 2022.

The company reported net income of $0.1 million for the first quarter of 2023, as compared to a net income of $2.0 million in the prior quarter and a net loss of $1.2 million for the first quarter of 2022. For the full year 2022, the company reported annual net income of -$263,000, annual revenue of $21,198,000, annual operating cash flow of $4,847,000, and annual free cash flow of -$1,492,000.

Liquidity

QuickLogic's principal contractual commitments include purchase obligations, re-payments of draw-downs from the revolving line of credit, and payments under operating and financing arrangements. As of March 31, 2023, the company had $27.4 million in cash, cash equivalents, and restricted cash, inclusive of a $20.0 million advance from its Revolving Facility and $3.5 million in net proceeds from the company's sale of common stock in the three months ended March 31, 2023.

The company was in compliance with all the Revolving Facility loan covenants as of March 31, 2023. As of March 31, 2023, the company had $20.0 million outstanding on the Revolving Facility with an interest rate of 9.00%. QuickLogic's restricted cash balance as of March 31, 2023 was $0.1 million and relates to amounts pledged as cash security for the use of credit cards.

Geographical Revenue Distribution

Geographically, the majority of QuickLogic's revenue in the first quarter of 2023 was derived from North America, which accounted for $5.0 million or 82% of total revenue. Asia Pacific and Europe contributed $0.7 million and $0.2 million, respectively, to the company's first-quarter revenue.

Revenue Breakdown

In terms of revenue breakdown, new products, which include hardware products, eFPGA IP and professional services, and SaaS & Other, accounted for $4.9 million or 81% of total revenue in the first quarter of 2023. Mature products, which include all products produced on semiconductor processes larger than 180 nanometers, contributed $1.1 million or 19% of total revenue.

The increase in new product revenue in the first quarter of 2023 compared to the same period last year was primarily driven by a 44% increase in eFPGA IP and professional services revenue, which reached $4.0 million, and a 206% increase in hardware product revenue, which reached $0.5 million. The increase in mature product revenue was modest at 5% year-over-year.

Outlook

Looking ahead, QuickLogic provided guidance for the second quarter of fiscal 2023, which will end on June 30, 2023. The company expects revenue to be approximately $4.5 million, plus or minus 10%, which represents an increase of 55% over the second quarter of 2022. The company anticipates that new product revenue will be around $3.6 million, a year-over-year increase of 64%, while mature product revenue is expected to be $0.9 million, a year-over-year increase of 29%.

For the full year 2023, QuickLogic is still anticipating more than 30% growth in revenue and positive cash flow generation. The company's non-GAAP gross margin for the second quarter is expected to be approximately 70%, plus or minus 5 percentage points, while non-GAAP operating expenses are expected to be around $3.2 million, plus or minus 10%.

Competitive Advantages

QuickLogic's unique position and more than 3 decades of experience as a manufacturer of FPGA-centric devices set it apart from other eFPGA IP companies. The company's capabilities in final design, device fabrication, packaging, test, and finished device delivery for its customers expand its Served Available Market for IP to include customers that do not have these capabilities in-house and want QuickLogic to "Storefront" their designs.

The company's proprietary tools, such as the Australis IP Generator, help its IP customers that prefer to manage the manufacturing flow, shorten design cycles, and lower development costs, providing them with a more efficient path to target the foundry and fabrication process of their choosing.

Recent Developments

QuickLogic's momentum is supported by the fact that it is seeing more opportunities in a wide variety of end markets, including the Defense market, where some of the most noteworthy prime contractors have recently approached the company to discuss strategic partnerships to pursue major contracts. The company's $179 million sales funnel, which is at an all-time record, further underscores its strong position in the market.

The company's SensiML subsidiary has also made significant progress, with the announcement of a six-figure contract with a major microcontroller (MCU) company and the unveiling of an open-source strategy that is expected to accelerate near-term revenue and substantially accelerate end-user adoption.

Conclusion

Overall, QuickLogic's unique capabilities, strong market position, and promising growth prospects in both its eFPGA IP and AI/ML software businesses make it an intriguing investment opportunity for those looking to gain exposure to the rapidly evolving semiconductor and embedded systems markets.