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QuickLogic's (QUIK) Q2 Loss In Line, Revenues Improve Y/Y

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QuickLogic Corp.’s (QUIK - Free Report) non-GAAP loss of 4 cents per share in second-quarter 2018 came in line with the Zacks Consensus Estimate but was narrower than the year-ago quarter’s loss of 5 cents per share.

Revenues of $3.1 million increased 3% on a year-over-year basis and also met the Zacks Consensus Estimate.

Quarter Details

Segment wise, new products (51% of revenues) were up 6% year over year to $1.6 million. Mature products (49% of revenues) accounted for $1.5 million of the revenues and remained flat on a year-over-year basis.

During the quarter, the company had four customers which accounted for more than 10% of total revenues. This was primarily due to continued success in expanding customer base.  Samsung accounted for less than 10% of total revenues.

Geographically, revenues from Asia Pacific accounted for 41% of total revenues, while revenues from North America and Europe accounted for 47% and 9% of total revenues, respectively.

Increasing adoption of QuikLogic’s sensor processing solutions and embedded FPGA (eFPGA) Intellectual Property (IP) Licensing is a tailwind. Further, the company’s new support center in Taiwan related to eFPGA IP has aided it in developing relationships with prospective customers, which will eventually lead to design wins.

During the quarter, C-Sky Microsystems inked a deal with QuickLogic for incorporating the company’s flagship ArcticPro embedded FPGA solutions in a flexible, ultra-low power common CPU platform that will be using  SMIC low power 40 nanometer process. The platform is likely to be available in mid-2019.

Notably, QuickLogic was granted a patent for Flexible Fusion Engine (FFE) by the United States Patent and Trademark Office. Notably, it is used for always-on sensor processing in the EOS S3 multi-core processor. The company’s sensor processing segment has seen rapid growth driven by its EOS S3 software on a chip (SoC), which has the capability to support always-on/always listening requirement at a very low power consumption level.

In this regard QuickLogic's EOS S3 SoC was selected by BBK Educational Electronics Corporation Ltd. Further, Qualcomm Incorporated (QCOM - Free Report) incorporated QuickLogic's EOS S3 voice and sensor processing platform to its eXtension program.

As the world is moving toward voice interfaces like Amazon’s (AMZN - Free Report) Alexa, Apple’s (AAPL - Free Report) Siri, Alphabet’s OK Google, the need for technology products that run on voice command is also increasing. This is leading to the growing demand for this always-on feature in the mobile, wearable, hearable and battery powered IoT products industries.

This new feature is replacing the previously prevalent push-to-talk feature. The hardware architecture used for the push-to-talk feature is not considered apt for the always-on feature as it will consume more battery life. Consequently, QuickLogic’s low power consuming EOS S3 SoC with an integrated Low Power Sound Detector or LPSD is gaining wide acceptance in this scenario.

The company is witnessing increasing demand for wearable products in the B2B market, primarily driven by higher demand from hospitals and fitness focused companies, which need to track body activities and biometric information.

Management is also optimistic about the smartphone market. It is currently working with a Japanese smartphone OEM, which is expected to adopt QuickLogic’s EOS S3 SoC for its new models scheduled to be launched in 2020.

Margins

Non-GAAP gross margin expanded from 46.3% in the year-ago quarter to 50.1% in the reported quarter.

Non-GAAP operating expenses declined from $4.6 million in the year-ago quarter to $4.5 million.

Balance Sheet & Cash flow

The company exited the reported quarter with cash and cash equivalents of $22.8 million as compared with $12.6 million reported in the previous quarter. Net cash used during the second quarter was $3.9 million.

Guidance

For third-quarter 2018, management projects revenues of approximately $3.5 million (+/- 10%). New product revenues are forecast to be almost $1.8 million, while mature product revenues are projected to be $1.7 million. The Zacks Consensus Estimate for revenue is pegged at $5.1 million.

Non-GAAP gross margin is anticipated to be approximately 50% (+/- 3%), benefiting from favorable product mix.

Non-GAAP operating expenses are expected to be approximately $4.7 million (+/- $300K).

At the mid-point of guidance, non-GAAP loss is projected to be approximately $3 million or 3 cents per share. The Zacks Consensus Estimate is pegged at a loss of 3 cents.

For the third quarter, management expects to use cash between $2.5 million and $3 million, primarily due to working capital needs and capital expenditure associated with the company’s eFPGA and SoC development effort.

Zacks Rank

QuickLogic carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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