QuickLogic Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 13, 2024

There are 6 speakers on the call.

Operator

Ladies and gentlemen, good afternoon. At this time, I would like to welcome everyone to QuickLogic Corporation's Q1 fiscal 2024 Earnings Results Conference Call. As a reminder, today's call is being recorded for replay purposes through May 20, 2024. I would now like to turn the conference over to Ms. Allison Ziegler of Darrow's 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 and uncertainties, including, but not limited to, stated expectations to revenue from new and mature products, statements pertaining to QuickLogic's future performance, design activity and its ability to convert new design opportunities into production shipments, timing and market acceptance of its customer 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.

Speaker 1

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. 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 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.

Speaker 1

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 page 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 Q1 2024 conference call. Q1 revenue increased more than 45% year over year. This growth was driven by a nearly 60% increase in new product revenue, which was mostly from eFPGA IP contracts. With continued strong bookings, a record $179,000,000 funnel and some very significant eFPGA contract proposals pending, we remain confident that we'll deliver greater than 30% year over year revenue growth in 2020 4.

Speaker 2

Let's take a few minutes now to update the status for some of our major contracts and accomplishments. First, our strategic radiation hardened FPGA government contract that has a total potential of $72,000,000 Last August, we announced the 2nd tranche, which added Honeywell Aerospace as a foundry partner and increased the funding rate from tranche 1 levels to bring the Honeywell based development up to speed quickly. Tranche 2 also funded our continued activity with SkyWater Technologies. We are anticipating tranche 3 will be awarded later in Q2. And as we stated in our last conference call, we are modeling the funding rate for tranche 3 will likely decrease from tranche 2 and be more similar to tranche 1.

Speaker 2

Due to this and the strategic shift in how we are now dividing revenue between engineering services and IP license, while we are projecting Q2 revenue will be up significantly year over year, we are currently forecasting a sequential decrease from Q1. We believe Q2 will mark the low point for the year. Since it is important, I'll take a moment to review how the change in revenue split impacts when we recognize IP contract revenue on our income statement. At the start of the year, we shifted the majority of the IP contract dollar values from engineering services, which are recognized over the course of the contract to IP license, which is recognized at the completion of our deliverables. This shift better aligns revenue with our deliverables and improves our ability to effectively negotiate and win future contracts.

Speaker 2

While this change will push quite a bit of revenue recognition into the second half of twenty twenty four, it has absolutely no impact on our cash flow. We continue to believe we will be cash flow positive and solidly profitable for full year 2024. Beyond building on the success of our large government contract, we are very well positioned to significantly expand our IP business across many new customers and market sectors as well as the number of fabrication nodes supported by our IP in 2024. During our last conference call, I announced that we booked the first of 2 IP contracts that will be fabricated using the 12 nanometer processes and that the second contract was pending. We announced finalizing the second contract in a March press release.

Speaker 2

Both of these contracts will contribute to cash flow during the first half of twenty twenty four, but revenue will not be recognized on our income statements until completion of our deliverables in the second half of this year. The first contract is with a defense industrial based customer and will be fabricated on GlobalFoundries 12 nanometer process known as 12 LP. I cannot go into any details beyond the fact this contract is not related to the large ongoing radiation hardened FPGA contract I just discussed. The second contract is with a large international company that I'm sure you would recognize. This design is for a new ultra low power SoC that is targeting a variety of commercial IoT applications.

Speaker 2

This design will be fabricated by TSMC on its 12 nanometer process. Within the SoC, our eFPGA technology is used for AI acceleration, which is a necessary function in most AI applications. We believe this will prove to be a rapidly growing application that is often better served by eFPGA technology than a changes in acceleration algorithms and perform acceleration more quickly and using much less power than a processor based solution. In November 2022, I shared that we taped out a new device for a customer that incorporates our eFPGA IP. Due to strict confidentiality requirements, I can't share more details on the specific design win beyond a brief update.

Speaker 2

In line with what I covered during our last conference call, the customer is continuing to work through certain aspects of the design. This work is progressing and we anticipate resuming our efforts during the second half of twenty twenty four. This customer could represent tens of 1,000,000 of dollars in potential device revenue starting in a couple of years. Last September, we announced the leading technology company chose our eFPGA IP for a design that will be fabricated using GlobalFoundry's 22 FDX platform. Again, due to strict confidentiality requirements, I cannot go into more detail on the design, but I can share that we have delivered our IP to the customer and expect tape out to initiate this quarter.

Speaker 2

Last November, we announced the global semiconductor leader chose our eFPGA IP for a design that will be fabricated on UMC's 22 nanometer platform. We have completed the delivery of our IP and expect takeout to initiate this quarter. In total, we are on contract to deliver our IP on 6 different foundry process technology combinations, including 2 that will be fabricated using 12 nanometer technology. This is up 3x from a year ago with minimal growth in the associated R and D costs. This demonstrates the market demand for eFPGA IP is accelerating and that the automation from our proprietary Australis IP generator enables us to address this demand in a scalable way.

Speaker 2

We have several chiplet opportunities in our funnel, including deals with our partner, Yourchip. As a matter of fact, we recently submitted 2 substantial proposals this year with a combined value of over $40,000,000 1 in conjunction with your chip. As I mentioned in our last conference call, our lead smartphone customer work through its excess inventory of EOS S3 that limited our shipments during 2023, and we have resumed shipping to support production. We hosted a meeting with this customer at our San Jose headquarters earlier in Q2. Based on the customer's outlook, we expect volume will increase in 2024 as our EOS S3 solution was selected for new designs that will ship well into 2025.

Speaker 2

Consistent with the outlook we shared last quarter, we are forecasting a modest increase in display bridge shipments this year and expect mature product revenue will be similar to what it was in 2023. A couple of weeks ago, we announced the release of Aurora 2.6, our comprehensive eFPGA development tool suite. This release of Aurora includes a number of significant improvements that will expand our market opportunities and help us win new designs. In Aurora 2.6, we expanded operating system support to include multiple versions of Linux, including CentOS, Red Hat and Ubuntu, and included support for Windows 10 and 11. Furthermore, through the incorporation of new architectural improvements, Aurora 2.6 can also deliver up to a 15% improvement in speed.

Speaker 2

In some eFPGA designs, critical path timing can be even more important than raw speed. To address this need, Aurora 2.6 incorporates interactive path analysis and a new graphical user interface. For our customers, this means easier to use, better performance, shorter development cycles and lower development costs. With our planned investments in R and D, we have a cadence of Australis and Aurora releases scheduled throughout this year that will provide further improvements to flow automation, increase IP core speed by up to 50% and reduce die size for our eFPGA hard IP implementations. Turning to SensiML.

Speaker 2

I'm very excited about the progress made during the last 3 months. In short, there has been a notable shift in strategy that has accelerated near term revenue and we believe substantially accelerate end user adoption. The first step was to sign a 6 figure contract with a major MCU company, which puts SensiML on track to deliver the material 2024 revenue growth I forecasted last quarter. SensiML is discussing a similar agreement with other MCU companies. The second step will be revealed in more detail tomorrow morning.

Speaker 2

Leveraging the 4 years of experience and success monetizing an open source business model at QuickLogic, SensiML will announce its own open source strategy in a press release issued before the market opens. The short story here is open source provides customers the transparency and security they need to incorporate high value IP in their designs and in many cases also adopt proprietary processes and professional services. You have seen how this strategy has enabled QuickLogic to more fully leverage and monetize its proprietary IP and expand its reach into a variety of end markets. I believe we will see the same from SensiML and with the market's ravenous appetite to adopt AI and ML, we anticipate a much faster ramp and a much broader market reach for SensiML. With that, let me now turn the call over to Elias for a review of the financial results, and I will rejoin for our closing remarks.

Speaker 2

Elias, please go ahead.

Speaker 3

Thank you, Brian, and good afternoon, everyone. I am happy to report that our first quarter revenue aligned with our forecast and drove our 3rd consecutive quarter of profitability on a non GAAP basis. Revenue for the Q1 was $6,000,000 a solid 45% increase from the Q1 of 2023. Compared to the Q4 of 2023, Q1 revenue was off approximately 20%, reflecting the previously communicated strategic shift in the split of FPGA IP contracts revenue between professional services and IP license that will push most of the revenue recognition to the second half of the year. Please note this shift does not affect cash flow.

Speaker 3

Within our Q1 revenue, sales of new products are approximately $4,900,000 This compares to $3,100,000 in the Q1 last year, up nearly 60% and $6,600,000 in the Q4 of 2023, down 29%. Mature product revenue was approximately $1,100,000 This compares to $1,100,000 in the Q1 of last year and $700,000 in the 4th quarter. Our results continue to reflect higher eFPG IP license and professional services revenue. Non GAAP gross margin in Q1 was 70.3% compared with 59.7% in the Q1 of 2023 and 78.3% in the 4th quarter. The strong gross margins in the last few quarters resulted from the higher revenue level and a higher concentration of revenue related to IP contracts.

Speaker 3

Our non GAAP operating expenses in Q1 2024 were approximately $2,500,000 This compares with non GAAP operating expenses of $2,900,000 in the Q1 last year and $3,100,000 in the 4th quarter. Reduced non GAAP operating expenses in Q1 2024 were below our outlook, primarily due to allocations from R and D to COGS due to the professional services contracts and reductions in outside services and SG and A. Please note, the larger difference between GAAP and non GAAP operating expenses is attributable to the timing of stock based compensation for deferred incentives for executives and managers from prior years. This deferred incentive compensation accounted for approximately half of the stock based compensation recorded for Q1. Non GAAP net income was $1,700,000 or $0.11 per diluted share.

Speaker 3

This compares to a non GAAP net loss of $500,000 or $0.04 per share in last year's Q1 and non GAAP net income of $2,600,000 or $0.18 per diluted share in the Q4 of fiscal 2023. For the Q1, one customer accounted for 10% of our revenue. At the close of Q1, total cash was $27,400,000 compared to $24,600,000 at year end 2023. This is inclusive of $3,500,000 net proceeds raised with a registered direct offering with certain institutional investors in March of this year. It is also inclusive of our $20,000,000 credit facility.

Speaker 3

Now moving to our guidance for the Q2 of fiscal 2024, which will end on June 30, 2024. Revenue guidance for Q2 2024 is approximately $4,500,000 plus or minus 10%, which represents an increase of 55% over Q2 2023. 2nd quarter revenue is expected to be comprised of approximately $3,600,000 of new products, which is a year over year increase of 64 percent and 900,000 mature products, which is a year over year increase of 29%. The projected total value decline from Q1 2024 is primarily due to the timing and cadence of large IP contracts and a strategic shift that splits a higher percentage of contract revenue to IP versus engineering services to better align with our deliverables. This will continue to result in shifting revenue recognition to the second half of the year, but is not expected to impact the timing of cash flow from these contracts.

Speaker 3

For the full year 2024, we are still anticipating more than 30% growth in revenue and positive cash flow generation. Based on the anticipated Q2 revenue mix, non GAAP gross margin for the quarter is expected to be approximately 70% plus or minus 5 percentage points. Our non GAAP operating expenses will be approximately $3,200,000 plus or minus 10%. We believe quarterly non GAAP OpEx will remain in the $3,200,000 range for the balance of 2024 with occasional increases to support new programs. Please note that given the nature of our industry, we may occasionally need to reclassify certain expenses to COGS or capitalize certain costs.

Speaker 3

The reclassifications are primarily related to labor and tooling for our revenue contracts with customers. Such capitalization may reduce OpEx and alter the timing for recognizing corresponding expenses and funds. This may cause variability in our gross margins and operating results. Bearing these factors in mind, we believe our full year 2024 non GAAP gross profit margin will be in the upper 60% range. We believe we are well positioned to deliver robust profitability for the full year 2020 4.

Speaker 3

After interest, other income and taxes, we currently forecast that our Q2 non GAAP net income will be approximately $0,000 to $400,000 or 0 $0.03 per share based on roughly 14,700,000 fully diluted shares. 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 800,000 dollars As a reminder, there will be movement in our stock based compensation during the year and it will vary each quarter based on the timing of grants to employees. With investments this quarter to support the new design wins that we have discussed, including hiring critical engineering and sales roles and the timing of certain payments, at the midpoint, we expect cash reserves to be less than $1,000,000 again in Q2. These investments are in anticipation of continued strong growth in 2024 and timed with the signing of new contracts for design wins.

Speaker 3

As previously mentioned, we are on track to achieve cash flow positivity in the Q3 and for the full year 2024. Thank you for your time. With that, let me now turn the call back over to Brian for his closing remarks.

Speaker 2

Thank you, Elias. It has become increasingly evident that our unique position and more than 3 decades of experience as a manufacturer and established relationships that are required to manage final design, device fabrication, package, test and finished device delivery for the many customers that don't have these resources in house. These capabilities expand our served available market for IT to include customers that do not have these capabilities in house and want us to storefront their designs. This opens markets for us that could be orders of magnitude larger than our core IP license business. Some of these opportunities are well defined and near enough that they are included in our rolling 2 year funnel, which is currently at the all time record of $179,000,000 The experiences we gained through more than 30 years of designing and delivering semiconductor devices is also at the foundation of the proprietary tools we've developed.

Speaker 2

These tools help our IP customers that prefer to manage the manufacturing flow, shorten design cycles and lower development costs. This provides them with a much more efficient path to target the foundry and fabrication process of their choosing. As I noted in our last call, I think 3 years of greater than 30% top line growth proves our IP business model, built upon open source components, has traction in the market and with that traction established, we are building momentum. That momentum is supported by the fact we are 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 us to discuss strategic partnerships to pursue major contracts. While 2024 will be another year of building our IP foundation and we believe will drive another year of 30% plus growth, We also think there is a very good chance that our growth will accelerate in the near future as storefront, royalty questions.

Speaker 3

And the

Operator

first question comes from the line of Richard Shannon with Craig Hallum. Please proceed.

Speaker 4

Hi, Brian and Elias. How are you guys doing?

Speaker 3

Good. Richard, how are you?

Speaker 4

Doing fine. Thank you. Let's see here a couple of questions. I guess I just wanted to make sure I understand the guidance for the quarter and for the year here. You're talking about the specific large project with RadHard being the 3rd tranche being awarded here sometime during the quarter.

Speaker 4

Is the guidance for the 2nd quarter, is that is there are you including anything from that expectation in there or is it all in the back half of the year?

Speaker 2

We are factoring in our estimate for that in Q2 in the guidance that we provided.

Speaker 4

Okay. That's fair enough. And then did I hear correctly related to RadHard deal that you're expecting a cadence of revenues in the 3rd tranche that's closer to that of the first tranche of it? And if so, can you maybe elaborate on that?

Speaker 2

Yes. If you remember the first tranche was in awarded in August of 2022. And the total value of that contract was effectively spread across for approximately 10 months. And so we're expecting a similar monthly rate for this 3rd tranche. And when I say expecting, I should say, we're estimating because we're still going through this process with our sponsor.

Speaker 2

But that's the modeling that we're using as we're providing our Q2 guidance and our full year revenue outlook for 2024.

Speaker 4

Okay, fair enough. That's good to know. Let's see a couple more questions. Very intriguing here about SensiML. You got a $100,000 plus contract here with a major MCU company here.

Speaker 4

Maybe if you can I don't know if you want to front run what we may hear about tomorrow morning or not, but just kind of want to get a sense of what this is all about, just a company that has no capability and kind of edge AI or kind of a complement to what they already have and maybe you can kind of characterize what you mean by major?

Speaker 2

Yes, I'd say major for us in the microcontroller space would be, let's say, top 10 microcontroller vendors. We're not going to go into details on the nature of the contract itself on this call. But maybe what I'll do is tease out a little bit more of the detail that's going to go out in the press release tomorrow from SensiML, because I think it's related to this. So the open sourcing of SensiML, if you think about firstly what QuickLogic has done, done, we're leveraging a lot of open source components, because you get a lot of sort of industry collaborating and contributing to features and enhancements that smaller companies can't do in time or money by themselves. And so the acceleration and bringing in new capabilities to an already, I would say, very well established toolkit that SensiML has.

Speaker 2

And then by virtue of that, people that are looking at machine learning, AI software workflows like SensiML, I think they can take some confidence in the fact that what they see today is probably only a fraction of what the capability is in the future. And there'll be an open source path for some of the core elements of that provided that those companies want to abide by what's called a copyleft open source licensing scheme as opposed to the more permissive Apache or MIT open source licenses. So, I think the combination of having these options out there for people to license will give them the comfort and inspectability and security and future growth in features and functions and maybe even more if it speaks for them to actually do further licensing deals with SensiML in the future, especially when you think that SensiML having established this for so long and understanding how you manage cloud service components and how you set up the customer derivatives, the private labels, the identification aspects, all the things you would expect from doing business with an actual company on software. So I think it's exciting. They're going to have learned a lot from what QuickLogic has learned in terms of how to effectively monetize and leverage, collaborations with the open source community.

Speaker 2

And I think we'll see that happening here with SensiOne. Of course, there'll be a lot more details in the press release tomorrow.

Speaker 4

Okay. Fair enough. Great detail there. I'll probably follow-up on that topic. Sounds very interesting.

Speaker 4

My last question here and I'll jump out of line is, hopefully I caught the right language that you provided here, but you talked about a couple of different contracts in chiplets where you submitted proposals for over $40,000,000 one of with your announced partner of your chip. Dollars 40,000,000 is pretty sizable for you. I would assume that these include some elements of storefront in there,

Speaker 2

but maybe you could kind

Speaker 4

of give any more clarity on when you expect those to be awarded and maybe other details you can offer? Thanks, Brian.

Speaker 2

Yes. I can elaborate a little bit more on that, Richard. So firstly, remember anything that's outside of roughly 2 years horizon does not fall into our sales funnel. It only falls into that funnel in terms of the dollar values like the $179,000,000 that we just talked about today once it's within approximately 2 year horizon. So these chiplets specific ones that we are talking about and the $40,000,000 do have the potential to become chiplets and we would like that.

Speaker 2

But I think two factors to remember here. 1 is the chiplet revenue is not part of that 40,000,000 dollars And 2, any chiplet revenue that would be part of that would be outside of the sales funnel at this point in time just because of the window, right? But I think that you bring up an interesting question there and I think part of that relates to our optimism and confidence in hitting this 30% revenue growth number for 2024, because obviously that would require a fairly significant increase in second half revenue over the first half. So I'll be as specific as I can without getting into details bound by NDAs and bound by the specifics of these proposals I'm talking about. But we definitely review the continuation of the strategic Red Heart contracts, which you covered already.

Speaker 2

And then some of these other larger contracts like the $40,000,000 total dollar one, those could be hitting and contributing to revenue later this year. And there's even another one that I didn't name specifically, but a mid-seven digit proposal that we've been working on since last year, in fact, not part of that $40,000,000 chiplet proposals, number that I gave earlier. And we recently crossed a pretty important threshold in that whole process, the proposal process with that customer. So when you start to see the things clicking across multiple segments, multiple proposals and hitting these, what I'll call it, important internal milestones, Those are the things that give us the confidence that we are in fact going to recognize enough revenue this year from these contracts within 2024 to achieve a greater than 30% revenue growth. I think more than you directly asked for Richard, but I think it would be a Tommy to add that little color to it.

Speaker 4

I appreciate all that detail. Thanks for that, Brian. I will jump in the line for now. Thank you.

Speaker 3

Thanks, Phil.

Operator

And the next question comes from the line of Rick Neaton with Rivershore Investment Research. Please proceed.

Speaker 5

Thank you. Good afternoon, Brian and Elias.

Speaker 2

Good afternoon.

Speaker 5

I was interested in some of your comments about SensiML. The 6 figure contract mentioned in the press release and you mentioned it again in the prepared remarks, is that with a different MCU company than the white label agreement that SensiML has right now?

Speaker 2

We've not shared that detail, Rick. And really due to NDAs, we're not going to be able to directly answer it because I think when we start talking about about the number of companies we're targeting anyway, success with 1 or 2 or more, those I think starts to paint a clear picture about which entities we are talking about in these contracts and they don't want that detail shared by me. And so we really just have to sort of keep it at a high level when we talk about these. Sorry. That's all right.

Speaker 5

My next question is, you talked about AI accelerators and using FPGAs instead of other types of chips to accelerate AI functions. In your funnel, are there more than one of these AI opportunities in your funnel? And are there more that are outside of the funnel more than 2 years out?

Speaker 2

Yes and yes. Some of the recent proposals that I was just talking about have AI as part of them. I would say a key element of it. And, FPGA that we have today, the FPGA that we have today, I think can bring value to AI and acceleration, which is evident in that 12 nanometer wind we've already talked about previously. But I think more importantly, the further we get into this and the more research that's done gives us clues about how we can even adapt further our eFPGA architecture to even better accelerate for performance or lower power reasons, other chip designs that we have in the future.

Speaker 2

And so some of the proposals we have mentioned on this call already are about that more acceleration and lower power through other variations of our EFPGA architecture. So yes, there's definitely some in the funnel color value, the funnel opportunities we talked about. And there are some things that would be storefront that's outside the sales funnel number, but not opportunities. Generally, the opportunities we're tracking and prioritizing are ones that would contribute to revenue within the next few years. If it's outside of that, we tend to push that down the priorities that quickly.

Speaker 5

Thank you for that detail. In terms of AI, are FPGAs better suited for AI at the edge? Or are you seeing across the board AI use cases seeking to investigate the benefits of FPGA everywhere in the network?

Speaker 2

I think historically FPGAs have been used more, in the central the data center for AI and not so much at the edge because typical FPGAs tend to be much higher power, because they're designed for flat out performance at any cost and one of those costs tends to be power. As you've been following QuickLogic for a long time, you know that a lot of our FPGA wins in fact are on the other end of the spectrum, which tend to be on the cost and power side of the equation, where we optimize for power first. And so the I think that's one of the reasons why we were able to win this 12 nanometer design we talked earlier because that one's AI at the edge where power really, really does matter and where we already have success from our prior FPGA history as a company. Think about all the smartphone stuff at Kia Sur, obviously power is really important in those applications. Now if you think to the future though, I think there are more ASIC customers looking at how do they design for power at the edge and performance at the edge.

Speaker 2

And this is where adding a modest amount of programmable logic to their ASIC can actually help them optimize for those lighter workloads for AI at the edge without killing their power budget and their die size budget. So we see a lot of opportunity there. But I think it would be hard to overcome the press and the excitement around data center AI because that's dominating everything that we hear in the news today, right?

Speaker 5

Right. One final question, as it relates to some of your defense contract opportunities and the RadHard contract that we've talked about for several quarters now. Do the U. S. Federal government budget uncertainties come up to effect sometimes how these tranches are awarded and when they're awarded?

Speaker 2

I'm sure there is some impact from the federal budgeting process on these projects because at the end of the day, the budget has come from somewhere. But I think usually if you look at the firstly, the program that we have, I think there's a need for it. We're executing well. And so I think those are the types of programs that are going to continue to get priority from the budgeting process. I think the other thing I would note is that the awards that we're getting, the tranches we're getting are generally not like multiyear tranches.

Speaker 2

And so I think they're my belief anyway is that they're already allocated for within the budget of that year. And so that doesn't become such an issue. If we were getting or seeking multi year awards, then I think that probably would maybe become more at risk to the government budgeting cycle. But for the ones that we have, they don't foresee that's an issue. And really, if you think about the magnitude of the awards we're talking about, it's a de minimis in the grand scheme of things from a defense spending overall anyway.

Speaker 5

Okay. Thanks, Brian. Thanks for your detail.

Speaker 2

Thanks,

Operator

And our next question will come again from the line of Richard Shannon with Craig Hallum. Please proceed.

Speaker 4

Hi, guys. Brian, I guess just have one follow on question, kind of big picture. And that's really looking at the competitive environment of embedded FPGA IP space. How would you kind of compare in the environment versus 1 or 2 years ago? Is it

Speaker 2

Richard, are you there? Hey, Richard. Brian, can you hear me? Yes. I can hear you now, but the audio cut out, when you started to ask a question about the competitive landscape over the last couple of years.

Speaker 2

Could you repeat the question, please?

Speaker 4

Certainly. Can you hear me now?

Speaker 2

Yes, I can.

Speaker 4

Okay. I don't know why that went out. Sorry about that. Yes, so my general question here is on the competitive environment versus 1 or 2 years ago. How, if any, has it changed better or worse?

Speaker 4

Are you seeing more or less competitors out there? Any kind of changes in the competitive dynamics here that are been favorable or unfavorable to you in that timeframe?

Speaker 2

Yes. So I guess on the competitive landscape, if you go back a couple of years, I'd say the competitive landscape that we see is pretty unchanged. We see FlexLogix, we see Menta. We don't really see Acronix because our understanding is they're really just on one node. But the other 2, we those are the 2 that we would come across in any type of engagement.

Speaker 2

That's a pure IP based engagement. If you double click on that a little further, I think MENTA is pretty open that they're soft IP and FlexLogix and QuickLogix are pretty open that we're hard IP. And we think there's good reasons for doing hard IP and taking on that workload for the customer. So it makes our customers' life easier. If you double click a little further on the differences between the companies, I think this is one of the things I was trying to bring out in the closing remarks that I had.

Speaker 2

But so many of our customers appreciate the fact that we either on dog food and we've been doing devices both design and support and selling for 3 decades. And so we know not just how to build a core, but how to build a core for making it easier for people to use, including manufacturing and test and performance and then making the software represent that silicon really well. And it's not just about making the core work well, but it's also about that option for doing device development. And you could see a lot of the larger contract values that we're talking about actually include development of the device with the long term vision of standing up the storefront for those devices. And I think that's important, not just from a QuickLogic business and investor perspective, but it's important for our customers also because FPGA technology is relatively new as a core as you alluded to in your question.

Speaker 2

And I think people get more comfortable working with established companies that have been basically using and supporting those type of technology for decades. And that's one of the traction points that we're seeing in these different proposals. Even I have examples where somebody started out by talking to us as an FPGA vendor and then pivoting that into doing the device for them because it feels more FPGA content than not. So why not? That makes logical sense for the customer.

Speaker 2

So those are the kinds of dynamics we're seeing. I think you're starting to see more people interested in not just the leading edge technologies, but also some of what we would call mainstream technologies as evidenced by our wins that we're talking about going across different boundaries now on some of the more mainstream nodes. So it feels like we're starting to get people that are more comfortable with technology now and they don't need to be taught what an eFPGA is, but it's more like how can they make it useful for them. And so it's I think it's good that those conversations are happening because it means that the technology itself is not sure nascent anymore. Is that helping answer your questions?

Speaker 2

If you have follow on, Steve?

Speaker 4

Yes. That all makes sense. Just want to make sure I'm kind of keeping a pulse on the latest and I appreciate your perspective. That's all

Speaker 2

for me, Ryan. Thank you. Good. Thanks, Richard.

Operator

Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. I'd like to turn the call back to Brian Faith for closing remarks.

Speaker 2

All right. Well, I wanted to thank everybody for your continued support and we look forward to sharing our progress with you next quarter. Have a great day. Thank you.

Operator

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

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Earnings Conference Call
QuickLogic Q1 2024
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