QuickLogic Corporation Q2 FY2025 earnings call

• Focused engineering resources on two strategic initiatives: rad-hard FPGA test chip on GlobalFoundries 12LP and Australis 2.0. • Engineering resource shift pushed Q3 revenue down but expected to fuel Q4 revenue growth. • Discussed U.S. government SRH FPGA contract, with Q3 revenue recognition low and Q4 rebound expected. • Australis 2.0 update to support high-density eFPGA IP needs, with first eFPGA hard IP using it expected in Q4. • Digital proof-of-concept chiplet initiative to be completed before next call, targeting advanced fabrication nodes. • Acknowledged passing of Christine Russell and addition of Ron Shelton to Board.

Total second quarter revenue was $3.7 million. New product revenue in Q2 was $2.9 million, representing a 4.5% decrease from Q2 2024 and a 22.3% decrease from Q1 2025. Mature product revenue was $0.8 million, down from $1.1 million in Q2 2024 but up from $0.6 million in Q1 2025. Non-GAAP gross margin in Q2 was 31%, compared to 54.4% in Q2 2024 and 47.1% in Q1 2025.

• Q3 2025 revenue guidance: ~$2 million ±10%, with Q3 non-GAAP gross margin expected to be ~5%. • Full year 2025 revenue projected to be modestly lower than 2024. • Q4 expected to have solidly positive cash flow and non-GAAP profitability.

• Risks include delays in market acceptance of new products, ability to convert design opportunities to revenue, replacement of end-of-life product revenue, customer design activity, market acceptance of customers' products, new orders not leading to future revenue, introduction and production of new products on advanced wafer technology, marketing of new products, intense competition, hiring and retaining personnel, product demand/supply changes, economic conditions, political events, trade disputes, natural disasters, tax rate changes, and additional tax liabilities.

Q: In asking digging into your strategic decision to advance the test chip in Australis over more certain business that could possibly have accrued in Q3. It sounds like from your descriptions of the density of some of what you're targeting that you're actually targeting the most widely known competitors in the FPGA market, namely Intel's Altera, while it's still at Intel and AMD Xilinx in the U.S. How quickly can this particular defense business ramp in the storefront business over the coming quarters? Can you give us some color on that?

A: Yes, I can. And I think one of the points we're trying to convey in the prepared remarks is just how fast this is moving with the engagement with the defense industrial base and what accelerated, in particular, the tape-out that we funded on the strategic rad-hard FPGA. So I think the short answer is that we could start seeing some test chip revenue very early 2026, and we're anticipating having some of these devices on boards for customer engagement. And that's based on our ability to supply those. If we think about the demand side, conversations I've been having over the last couple of weeks have really emboldened us to go and accelerate this tape-out because I think we can all see from the news that there is a tremendous push not only to strengthen the systems that give us national security, but to do those in a way that they're manufactured and fabricated in onshore foundries. And if we look back at the last 2 years of the developments that we've been doing, more often than not, our eFPGA IP core developments have been in U.S. foundries. With GlobalFoundries on 12LP and 22FDX and with Intel on 18A. And I think knowing that, that demand is there, I think we've said multiple times now the DoD spends north of looks like $5 billion a year on semiconductors. And I think roughly half of that is a mix of FPGA and ASIC. So the sooner we can get an FPGA test chip taped out and manufactured in the hands of people, we can start engaging on storefront revenue on that. The sooner we can get IPs done, we can start getting inserted into ASICs, that's the #2 category. And of course, we can start monetizing that when we license. But again, back to your direct storefront question, I think the fact that we're taping this out now gives us the ability to start monetizing from test chips perspective in 2026. And who knows, that could lead to even end of year or early 2027 for more volume-oriented device sales on that technology. So I think it's absolutely the right decision that we accelerated that because if you're thinking about, do I do $1 million or $2 million more revenue this quarter and then forgo the chance to get into multi-hundred million dollar markets in the defense area with all this going on and these new systems being deployed, that's the wrong decision for investors. The right decision is to make sure that we have the chips on the table for when these companies are making these decisions on microelectronic components that go into the national defense types of systems that are going to be coming online in the next few years. And that's the bet that we've made. And I think that's absolutely the right bet to do that.

Q: So you talked about this great deal of interest from various defense programs and specifically the need for onshore manufacturing. You're obviously talking about rad-hard, rad-tolerance on a 12-nanometer node. Does this enthusiasm and acceleration of time frames, are you also seeing this in your strategic rad-hard on the other 2 foundries you've talked about working with for the last couple of years?

A: We are definitely seeing interest on the DIB on those. I'm not going to be able to go into more detail because that's the government contract, and I'm not allowed. I've asked again for permission to talk about it in more detail, but not been granted that. So I can't really go into more detail. But we are still seeing interest for that as well from an end customer perspective.