QuickLogic Q1 2023 Earnings Call Transcript

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May 16, 2023

Key Takeaways

  • QuickLogic now expects to grow fiscal 2023 revenue by more than 30 percent over fiscal 2022 and to achieve positive non-GAAP operating income starting in Q3 FY2023 and on an annual basis.
  • The company’s eFPGA IP pipeline has expanded to over $125 million—the largest in QuickLogic’s history—covering IP licenses, design services, royalties, and finished-device sales.
  • A top-tier semiconductor partner is nearing launch of a private-label SensiML AI toolkit, which could drive significant revenue from that partner’s large microcontroller customer base.
  • QuickLogic’s largest Q1 contributor was a radiation-hardened FPGA prototype contract for the U.S. Government, with potential follow-on device sales in a multihundred-million-dollar market.
  • The company ended Q1 with $20.9 million in cash and a non-GAAP net loss of $0.5 million ($0.04 per share), and expects cash usage to remain below $1 million per quarter.
AI Generated. May Contain Errors.
Earnings Conference Call
QuickLogic Q1 2023
00:00 / 00:00

There are 7 speakers on the call.

Operator

Ladies and gentlemen, good afternoon. At this time, I'd like to welcome everyone to QuickLogic Corporation's First Quarter Fiscal 20 20 3 Earnings Results Conference Call. As a reminder, today's call is being recorded for replay purposes through May 23, 2023. I would like to now turn the conference over to Ms. Allison Ziegler of Darrows Associates.

Operator

Ms. Ziegler, please go ahead.

Speaker 1

Thank you, operator, and thanks 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 Financial Officer. As a reminder, some of the comments QuickLogic makes today are forward looking statements that involve risks results and uncertainties, including, but not limited to, stated expectations related 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 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 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.

Speaker 1

You may refer to 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 on QuickLogic's IR webpage shortly after the conclusion of today's earnings call. I would now like to turn the call over to Brian. Go ahead, Brian.

Speaker 2

Thank you, Alison. Good afternoon, everyone, and thank you all for joining our 3 financial results conference call. I'd like to open today's call by sharing that given our progress in the 1st part of this year, I am even more bullish about 2023 today than when we spoke during our earnings call last quarter. We now expect to grow fiscal 2023 revenue by more than 30 percent over fiscal 2022. During Elias's prepared remarks, you will hear us provide our highest quarterly revenue guidance in recent history.

Speaker 2

And most importantly, my confidence is high that we will achieve positive non GAAP operating income starting in the Q3 of 2023 as well as on an annual basis. With that opening, let's get into details. Q1 was in line with our expectations provided during our Q4 call. We reported revenue of $4,100,000 of which new product revenue was 3,100,000 Our results continue to be driven by our eFPGA IP based products, including the RadHard program for the U. S.

Speaker 2

Government, our continued shipments of smart connectivity and display products and our SensiML AI software platform. Looking at some of the quarter's highlights, the top tier semiconductor company that is integrating a private label version of a SensiML powered solution to address its own customers' demand across its broad microcontroller line of products is nearing their product launch. This private labeling of the SensiML toolkit provides significant revenue potential as a result of their large installed customer base and sales force. Our large strategic radiation hardened FPGA contract for the U. S.

Speaker 2

Government was our largest contributor to revenue in the quarter and we remain positive on the next steps based upon continued successful performance of the base contract. The next steps are of course at the discretion of the U. S. Government. As a reminder, this current contract is for the development of the prototype FPGA and does not include any of the possible device sales to the defense industrial base customers.

Speaker 2

We believe this market to be several $100,000,000 in size and our intent on capturing our share of it in the coming years. On the strength of our numerous EFPGA IP based opportunities, our sales funnel grew to over $125,000,000 the largest in QuickLogic's history. Included in this number are deals for both eFPGA IP as well as bespoke or semi custom device development that incorporates One of our unique strengths continues to be that we offer a full spectrum of solutions ranging from eFPGA IP

Speaker 3

all the

Speaker 2

way to full chip designs which incorporate that IP. As a reminder, we have multiple revenue sources within this product category. Design services is how we monetize the R and D resources to develop our IP or bespoke devices for our customer, typically recognized as we do the engineering work. IP licenses are typically one time events recognized with the delivery of our IP to a customer. Royalties are typically a small percentage of the final device ASP recognized as our customers ship devices that include our IP.

Speaker 2

And finally, storefront simply means that our customer is buying a finished device from us. This could be because they lack the expertise in developing eFPGA enabled products or it could be that they don't have the supply chain in place to produce and test the devices for volume production. We've had this supply chain in place for decades and can monetize this value with our customers. More than ever before, the fact that we have been a trusted and In November of 2022, I shared that we had taped out a new device for a customer that incorporates our eFPGA IP. Revenue from the shipment of these test chips to our end customer will be recognized during this current fiscal quarter.

Speaker 2

Due to confidentiality requirements, I am not allowed to share any further details on the specific design win other than I believe it represents 2019. As mentioned on our previous call, One of the contributors to our pipeline growth is a new government focused eFPGA IP based contract targeting a 12 nanometer process node. This is our first contract for the 12 nanometer process node and we continue to believe there will be several more during this fiscal year. We did recognize revenue from this contract in Q1 and expect to recognize additional revenue throughout 2023. Moving to chiplets, we are seeing additional customer interest in chiplet based opportunities and we do expect to generate some revenue this fiscal year from either design services and or IP licensing that would fall into the triplet category.

Speaker 2

Moving to our mobile phone business, We expect our customers' inventory digestion to continue through at least the current quarter of this year. However, we have been told that we are being designed into new model While both will continue to contribute to gross margin uplift, they are still being impacted by well publicized macroeconomic factors. Fortunately, our fiscal 2023 growth is forecasted to primarily come from eFPGA IP related design wins. Before turning the call to Elias, I want to reiterate our revenue outlook for Q2 and the remainder of fiscal 2023. As discussed earlier in my prepared remarks, we have made significant progress in building our eFPGA IP related and software businesses over the past 2 years.

Speaker 2

This groundwork has led to a diverse and growing pipeline, which supports our current expectation for revenue in Q2 to be approximately $5,000,000 plus or minus 10%. Our current forecast shows a sequential ramp in our revenue throughout the remainder of the year, making us confident we will now exceed the 30% annual revenue growth we Q1. We are also on track to report our best non GAAP operating income in over 10 years, turning the corner to profitability starting in the Q3 of this year and on an annual basis as well. Let me now turn the call over to Elias for a review of the financial results. Elias, please go ahead.

Speaker 4

Thank you, Brian. Good afternoon, everyone. Our performance in Q1 was in line with our expectations with revenues of $4,100,000 and a non GAAP net loss of $500,000 reflecting another full quarter of With anticipated future additions to this contract plus growth in other commercial areas, we continue to believe we will likely get Let me now turn to the review of the results for the Q1. As I said, revenue in Q1 was $4,100,000 an increase of 1 point 2% compared to the Q4 of 2022 and an increase of 0.9% compared to the Q1 of 2022. The sustained growth is mainly due to increases in eFPGA related revenue, partially offset by a decrease in new hardware product revenue.

Speaker 4

Within our Q1 revenue, sales of new products were approximately $3,100,000 This compares with $2,800,000 last quarter, up 7.5 percent and $3,500,000 in the Q1 of 2022, down 11.4%. $1,100,000 compared to $1,200,000 last quarter and $600,000 in Q1 of last year. Q4 of 202261.5 percent in the Q1 of 2022. The improvement in gross Non GAAP operating expenses in Q1 'twenty three were approximately 2,900,000 The OpEx for Q1 was lower than our forecast due to reclassifications of certain R and D expenses to cost of goods. This compares to operating expenses of $2,400,000 last quarter $3,100,000 in the Q1 a year ago.

Speaker 4

Non GAAP net loss was $500,000 or loss of $0.04 per share based on 13,200,000 shares. This compares to a net loss of $500,000 or $0.04 per share last quarter and a net loss of $800,000 or $0.06 per share in the Q1 of fiscal 2022. Total cash at the end of Q1 was $20,900,000 compared with $19,200,000 at year end. The continued investment to support the new design wins we have discussed was offset by the approximately $2,300,000 raised in March 3, which will end on July 2, 2023. As Brian discussed, revenue guidance for Q2 is approximately $5,000,000 plus and $1,000,000 of mature products.

Speaker 4

Based on this revenue mix, non GAAP gross margin for the Q4 will be approximately 55%, plus or minus 5 percentage points. We will continue to see margin variances each quarter due to product mix and volatility in cost of goods sold. Our non GAAP operating expenses will be approximately 3,000,000 plus or minus 10%. On a quarterly basis during 2023, we believe OpEx will remain below the $3,000,000 range, which occasionally increases to support new programs. After interest expense, other income and taxes, We currently forecast on a non GAAP net loss of approximately $300,000 to 600,000 net loss of $0.02 to $0.06 per share based on roughly 13.4 shares outstanding pardon me, 13,400,000 of shares outstanding.

Speaker 4

The difference between our GAAP and non GAAP results is related to non cash stock based compensation expenses. In Q2, we expect this compensation will be approximately 700,000 As a reminder, there will be movement in our stock based compensation during the year and may vary each quarter based on the timing of grants to employees. Moving to the balance sheet. Even with continued investment to support the new design wins that we have discussed at the midpoint, we expect cash usage to continue to be below $1,000,000 per quarter. As we stated earlier, with the new large design wins and overall momentum and the back half of the year leading to positive non GAAP operating income.

Speaker 4

Thank you everyone for joining us. With that, let me now turn the call back over to Brian for his closing remarks.

Speaker 2

Thank you, Elias. This is a very exciting time at QuickLogic. We are on the cusp of profitability. The business has been transformed driven by our eFPGA IP based products, including the RadHard program for the U. S.

Speaker 2

Government, our continued shipments of smart connectivity and display products and our SensiML AI software platform. QuickLogic FPGA technology is steadily extending its reach to new customers, markets and applications. Our growing pipeline is supporting our strong conviction that we will see acceleration in our revenues starting this quarter and sequentially in each of the remaining quarters this year, leading to non GAAP operating income profitability for all of 2023. I would like to again thank all our key stakeholders including investors, Operator, I would now like to open the call for questions.

Operator

Thank you. We will now be conducting a question and answer session. Thank you. Our first question comes from Richard Shannon with Craig Hallum. Please proceed with your question.

Speaker 5

Great. Thanks, Brian and Elias for taking my questions and congratulations on a good start to the year here. Maybe I'll start with the top down question on your sales growth guidance of at least 30%. You sound increasingly confident of that. Want to get a sense here of some of the new contributions or areas where there's more certainty.

Speaker 5

It Certainly sounds like SensiML might be built into that. Want to get us maybe kind of do the top down here and where the confidence is coming from, including that? And then I'll probably have a follow-up on that one.

Speaker 2

Yes, thanks for the question, Richard. Most of the revenue growth is going to come from the EFPJ related products by far. That being said, we are forecasting growth in both eFPGA and in SensiML for the year. We give a little bit of airtime to SensiML on the soon to be rolled out private label version of the tool with the microcontroller company. And so some of the anticipated revenue from that initiative is definitely baked into the second half of the year.

Speaker 2

But again, I would say the ones that we have more clear line of sight to between now and the end of the year are falling into the EFPGA product category.

Speaker 5

Okay. And then how much from the embedded FPGA category, are you baking any more revenues or at least more confidence in the strategic RadHard part and then also to what degree are you seeing increased activity within the 12 nanometer nodes as you talked about last quarter and

Speaker 2

I'll go in reverse order on the questions there. On the 12 nanometer, We are seeing a lot more activity on that node and a lot of inbound interest now. The more we get out into these, What I'll call government or defense oriented trade shows and conferences, we're starting to get higher visibility in what we're doing And a lot more inbound interest on that. So that's increasing our confidence on getting multiple 12 nanometer licenses this year. On the government contract, I'm really not at liberty to say much other than there is some revenue from that built into the forecast, obviously.

Speaker 2

And we're feeling comfortable to include some of that in the back half of the year as well.

Speaker 6

Okay. Then

Speaker 5

as we think about your second half of the year where you're talking about positive pro how do we think about the gross margins as we go into the back half?

Speaker 4

Yes, Richard, I'll take that on. The company's outlook for sure has not changed. We're still targeting the 60% gross margin long term. But the mix of deliverables with us getting more development work early on, It's changed the scheme a bit. So that's why we're guiding that halfway 55% to that 59 percent, right, give or take 10%.

Speaker 4

So, you're going to see some volatility down the road until Probably next year, but the long term outlook is definitely for the 60s. Okay.

Speaker 5

All right, fair enough. I'll have one more question to jump out of line here, Brian. Again, on the embedded FPGA topic, some nice improvement in the pipeline, which is great to see. I'm going to ask a slightly different question, which is kind of understanding how the competitive dynamics in the space are evolving And kind of where do you see QuickLogic having the greater levels of success? You're talking about success in a lot of different market areas, although Government seems to be a fairly concentrated one for you, but maybe you can just talk about the competitive dynamics in this market, that'd be great.

Speaker 5

And that's all for me.

Speaker 2

Sure. So within the embedded FPGA space, there's primarily 3 companies outside of QuickLogic that are having an eFPGA based product. One is Acronics, Which also does devices and I think triplets. They tend to focus on the very, high end of the performance range. And so we don't typically run into them in competitive situations.

Speaker 2

The IP based the IP only based companies are FlexLogix and Menta. FlexLogix being a U. S. Company, Mentor being a French company. They have different types of products than we do.

Speaker 2

Mentos is a soft IP company. FlexLogic is hard IP. I think that both of those tend to focus on proprietary tools just like Achronix and almost every other FPGA company for that matter. So why are we different and why are we winning? You noticed that only Achronix had devices and IP, the other two companies only have IP.

Speaker 2

Increasingly, what we are seeing with our customers is They like the ability to choose. And what do I mean by that? We offer IP. We offer devices. We have chiplets in our roadmap as I've already discussed.

Speaker 2

And that provides a choice to the customer in how they want to work with us. We're not forcing them into one way of doing business. The other thing I'll say is that our development approach allows us to very quickly provide a core for a customer that is based on their requirements. Again, it's their choice. We don't have a singular product On a process note and say, here's our product, go make multiple copies of this to get to the requirements that you have.

Speaker 2

We can actually give them a custom tailored version and an automated approach that meets the requirements. And then last, I'll say, There's a big buzz now developing around open source tools and the level of transparency and inspectability that gives to the end customer. It would be obviously important in areas of security to have that sort of inspectability of the tools. But I think other customers are starting to look at that same thing now too that are outside of the security area. And we are the 1st company that has really embraced the open source And create some wins for us.

Speaker 2

That's the high level of comparison. I mean there's other ways that we can go down into details on each and every one and how we would do competitive positioning. But again, if you go back up to the high level, we're really the only company that has the Very fast to market approach in how we deliver IP that ultimately is tailored for the customer, not a stock product. And we're the only ones that give this choice Customers whether they want IP all the way to full turnkey device that they may need. And That's really resonating with the customers that we're winning with today.

Speaker 5

Okay, perfect. I love all that detail, Brian. Thanks for that and that's all for me.

Speaker 4

Thanks.

Operator

Thank you. Our next question comes from Martin Yang with Oppenheimer. Please proceed with your question.

Speaker 3

Hi. Thank you for taking my question. My first Question is on the test shift whose revenue will be recognized this quarter. Can you give us a bit more details on how long does it take from the test ship to higher volume shipments? And what are the key drivers

Speaker 2

Thanks for the question, Martin. Just for Clari, are you referring to the customer tape out that we discussed in particular?

Speaker 5

Yes, the November 2022.

Speaker 2

Okay. Yes. So I would say in general, it takes a couple of years to go from tape out to customer shipments. The reason being is that you would typically bake into that some test chip phase and Some validation and then a final takeout, and then the resulting manufacturing cycle times, some more validation And then final bring up by the customer. So we're forecasting a couple of years for that reason.

Speaker 2

That's Fairly typical, I would say. Sometimes it's longer. Like we said publicly, the bigger government project could be 4 years, and That's probably understandable why that would be longer, but in most cases it's around 2 years. And by the way, we saw the same for us too even when we were doing chips for ourselves and selling it to the basis. If you have lead customers lined up for that, it still takes a couple of years before they can get something designed into a system validated and

Speaker 3

Got it. Thank you. My next question is on private label SensiML. And what does the revenue pattern look like? Is there any upfront payment involved in addition to SaaS revenues When they get traction in their own customers?

Speaker 2

Yes, it's a great question Martin. So, if you I think, Dick, through the filings that we've done on the financials, the Qs and whatnot, I think you'll see revenue contribution from Well, it's gone up and gone down a little bit. The little going up momentum is around getting payment for some of these things. It's not just existing customers or subscriptions, but also some of the work and licensing associated with the private label agreement. And then as we develop and deliver things and then that company goes through their integration work, there's sort of a lull in the revenue for them specifically Before they push that out, the private label version out to their own customer base and then we start getting, follow on business from their customers.

Speaker 2

So we're in that sort of transition point where they have what they need from us. We had some earlier revenue recognition for that early upfront work. Now they're integrating and they're going to launch and so we're basing some of the second half forecast and outlook that we gave on the call today, Assuming that they are going to be launching that successfully and getting the appropriate level of customer interest converted over to what would be SaaS agreement to us When those customers start using the toolkit in this year and then ultimately royalties from those customers that start using those AI models in a production system.

Speaker 3

Got it. Thank you.

Speaker 2

Did that answer your question?

Speaker 3

My final question yes. And my final question is related to this one. And do you expect more private label deals such as this one or the rest of 2023?

Speaker 2

We do expect more private label deals. I think I mentioned this on some previous calls that what we have today with this first one is not exclusive. And so we are well within our rights to proliferate this model further and that is our intent. I would say that the forecast numbers that we have given Today on the call, do not depend on having another private label deal in place, but it's certainly our target that we want To go pursue that. The nice thing about software is that once we have a certain development done and a certain way of delivering that to customers We're partners in this case.

Speaker 2

We can repackage that very quickly for other customers and partners too. So again, once private label is done the first time, it's sort of a pipe cleaner For, rinse and repeat type of opportunities with other partners. And so we're very intense and I know the SensiML team is focused on doing that rinse and repeat This year.

Speaker 3

Got it. Great to hear. Thank you.

Speaker 2

Thanks, Martin.

Operator

Thank you. Our next question comes from Rick Needham with Research Investment Research. Please proceed with your question.

Speaker 6

Hi, Brian. Hi, Elias.

Speaker 4

Hi, Elias.

Speaker 6

Hey, thanks. Congratulations on some positive results. I had a question about the balance sheet. I noticed a reclassification of some assets into contract assets And they look like they came from accounts receivable. Can you provide some extra color on That reclassification and what it involves and why it happened?

Speaker 4

Well, we every quarter we go through the AR, just to make sure that whoever is not paying, we know you take a reserve against them. We don't have any bad debts in the company, which is great. People pay attention to that, but there were few assets that part of the review with our independent auditors resulted in us Moving them around a bit. It wasn't that much, but it was just a movement around of certain things that is part of, I would call it, housecleaning of sorts. But rest assured, there is no bad debts in the mix.

Speaker 6

Okay. FPGA markets have been pretty strong for the last year, Brian. And a lot of that strength has been with larger use cases like in data centers and that. But Your revenue outlook for the year is consistent with 30% -plus growth at a lot of these FPGA companies. What trend is driving this surge in FPGA interest by customers all of a sudden?

Speaker 2

So it's a good question, Rick, and I've thought about this a lot myself. I think that In general, people are from a hardware design perspective, in general, people like to use standard products, so they don't have to pay NREs to go off and do their own chip design. And FPGAs are great center products because They can be personalized by the customers for their use case. So there's a lot of sort of reuse and customization that customers get out of that buying of a standard product. I think that my own personal opinion, I don't know that this is in any research report anywhere, But my personal opinion is that there were and continue to be a lot of companies that have taken advantage of the pandemic and raised a lot of prices and made a lot of money, not necessarily winning new designs, but Let's say maximizing revenue and profit on One Designs, previously One Designs.

Speaker 2

I'm actually very proud in our company and that a lot of the revenue growth that you've seen over the last 2 years has actually been true New wins, new product wins, things that did not exist from a revenue stream perspective more than 2 years ago for QuickLogic. So I would like to think that that's a good contrast to what you may be seeing in the general market trends. I think moving forward, companies are having to choose where they put their inventory dollars from a semiconductor Got a company perspective. And what that means is that they're going to probably stockpile fewer die that move a lot faster than ones that are On the customer, right, to know exactly what they're going to be needing more than a year from now and placing these non cancelable orders with the suppliers. I think that that's given people certainly customers impetus to go off and change suppliers where they may be able to get better lead times for certainly companies that are more flexible to Work with them on what the lead time should be.

Speaker 2

And I think that we're starting to see some of that now trickle into QuickLogic And also translating as I mentioned earlier not just into buying standard products from us, but also companies now that are perhaps below the cut line in terms of allocation from the FPGA supplier perspective, looking at potentially doing semi custom devices for themselves so that they can No, that they're going to get supply of these devices now well into the future. And that's also driving some definitely some near term interest for us. Although I would say that We don't have that kind of a thing baked into the forecast for this year, which I think is hopefully a positive message to the investors.

Speaker 6

Okay. I appreciate that color, Brian. I have one final question. In the last few quarters, if a CEO mentions that their company is working on AI, the stock price jumps about 50%, It seems 5 or 6 years ago, Quick had a product called QuickAI and you've kind of morphed or move forward on this concept in using your IP And your products, what did you learn from that effort a few years ago? And what changes have you made that Successfully moving QuickLogic into being a player in AI applications on the edge.

Speaker 2

Another great question, right. My answer here could take a long time, but I'll try to keep it short. Sorry, I was there. So if you rewind, yes, we had a product QuickAI. QuickAI was EOS S3 or microcontroller plus FPGA device along with some AI software that allowed people to do inferencing at the edge in low power applications.

Speaker 2

So we were focused on the very, very far edge of the network where the sensor resides, low power silicon doing inferencing, so you don't have to go back to the cloud. I mentioned that because typically when you see anything to do with AI, it's really talking about Image recognition and computer vision and things related to autonomous driving and data centers like we're talking about applications that are not And I can guarantee you that we wrote our script by hand. We did not have Chat GPT write our earnings script today. I think that The point that I want to make as far as what we learned is that we learned that software is actually a huge part of the solution for AI, which ultimately led to the acquisition of SensiML. It also we learned that It is very difficult to go against very entrenched competitors.

Speaker 2

So if you think about AI, NVIDIA probably comes to mind because if you don't have something that needs to run at extremely low power, NVIDIA is the king of AI for silicon, right, using GPUs. And I think in the 5 years since then, I mean how many tens or hundreds of companies have said that they're an AI startup company now doing chips How many of them are actually still around competing with the likes of NVIDIA? It's pretty small list. So I'm actually I'm glad that we didn't continue down the silicon path of developing new chips for AI because that was Became a very bloody market very quickly. I think on the software side, I'm glad that we acquired SensiML.

Speaker 2

I think If you think about AI software and you just look at the number of acquisitions that have been made in the last year alone on SensiML light companies, it's actually increasing more and more. I And so I think that shows that there is quite a lot of value in the software for that. Who knows what that could lead to for us or the SensiML Group, but I like the fact that we have that expertise and products Within the umbrella of QuickLogic. And then lastly, I'll say that, it's been public that we've looked at FPGA or eFPGA on the same chip as a processor doing AI inferencing at the edge. And that led to some of the research that we did on that Arnold device, the 22 nanometer RISC V chip with embedded FPGA.

Speaker 2

That actually that work, that research and the paper that came out of that directly contributed to us closing this 12 nanometer design I mentioned on the call earlier And the same call last quarter. So I think that having IP and having software is probably the best way of getting into The type of AI that we can be adding value to, because it's the least capital intensive, both of those out of all the things that we could be doing in AI. And it's also both of those are something that NVIDIA is not doing. And so we are not competing against the likes of somebody that's so entrenched like NVIDIA. So I like where we are.

Speaker 2

I like the lessons we learned. And I think that what we have now for AI allows us to have a story that's It's beneficial to the customer. It's credible and it's not incredibly capital intensive like some of these AI chip companies are doing as a standalone chip company for that. In fact, I think just to add on to that and this kind of goes back to Richard's question about How we compare to different, EFPGA competitors. I think FlexLogic's, in fact, tried to do AI chips in addition to IP, and I don't think that they're doing that anymore.

Speaker 2

So it just goes to show you no matter what team and how much funding you have in place, it's pretty darn tough to go after somebody like NVIDIA with a solution. And I'm glad that we're not attempting to do that here.

Speaker 6

Brian, I appreciate all the detail and the length of time you gave in answering both of my last questions. Thank you so much.

Speaker 2

You're welcome, Eric. Thank you for the questions.

Operator

Thank you. Our next question comes from John Gruber with Gruber and McBean. Please proceed with your question.

Speaker 3

Good afternoon. Yes, the funnel, dollars 125,000,000 How many years is that? Because unless it's 40 years, there'd be a point where if you should be drawing $8,000,000 $10,000,000 $7,000,000 per quarter from the funnel to revenue. And when does that happen? This sure hasn't happened yet.

Speaker 2

Yes. Thanks for the question, John. The funnel that we're talking about now, the numbers we're using are about, I would say 2 years out and in from a total funnel perspective. We're not going to close 100% of that. I think Nobody would believe that, but these are definitely qualified opportunities that were in architecture discussions or we're in contract discussions with those customers and believe that a really healthy percentage of that can translate into revenue starting from even the current quarter, in fact, converting some of that into revenue for this quarter that would Be part of this growth to the $5,000,000 revenue level this quarter and then sequentially the rest of this year.

Speaker 3

Yes, but you're talking $1,000,000 increase. So we're not if it's if your win rate is 40% of 120 And it's 2 years, you should be drawing down $5,000,000 $6,000,000 a quarter. Why isn't that happening?

Speaker 2

Like I said, I think this is the Q1 we're going to get to 5 in a long, long time. And I think that the team is getting much, Much better now at qualifying opportunities and converting these into revenue and you will see that revenue growth starting from this quarter continuing on And hopefully at some point next year we'll be throwing a 10 handle out there instead of 5 on quarterly revenue. I think we'd all like to see that.

Speaker 4

Thank you. Thanks, John.

Operator

Thank you. There are no further questions at this time. I would like to turn the floor back over to Brian Faith for closing comments.

Speaker 2

I want to thank you all for participating in today's call and for your We look forward to speaking when we report our Q2 fiscal year 2022 results in August or at some of the conferences we are attending over the next few months, including Craig Hallum on May 31, Stifel on June 6 and Oppenheimer on August 8 9. Have a great day. Thank

Operator

you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your

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