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QuickLogic's (QUIK) Q3 Earnings In Line, Revenues Up Y/Y

Zacks Equity Research

QuickLogic Corp. QUIK reported adjusted loss of 4 cents per share in third-quarter 2017, which was in line with the Zacks Consensus Estimate but narrower than the year-ago quarter’s loss of 6 cents per share.

Revenues of $3 million increased 6% on a year-over-year basis and also met the Zacks Consensus Estimate. Segment wise, new products (50% of revenues) were up 10% year over year to $1.5 million. Mature products (50% of revenues) accounted for $1.5 million of the revenues and remained flat on a year-over-year basis. Samsung accounted for 24% of total revenues compared with 21% during the previous quarter.

Management lowered guidance for the fourth quarter of 2017, primarily due to Display Bridge customers trimming the fourth-quarter forecast by around $450,000 and the delay in placing order for a new wearable design by the company’s tier one smartphone customer.

Additionally, its focus on the currently licensed technology running at high volume instead of expansion of the license agreement with an existing fab partner hurt the company’s revenues in the third quarter. The trend is expected to continue in the fourth quarter as well.

Product Line Details

Regarding the embedded FPGA IP business, management noted that engagement with major semiconductor companies and original equipment manufacturers (OEM) is in progress. The process of finalizing qualifications with the fabrication partners is on.

During the quarter, the company’s test-chip qualification for SMIC low power 40 nanometer process was completed. In order to broaden its presence in the Chinese market, QuickLogic signed a partnership agreement with a prominent EDA tool and semiconductor IP distributor in China named AcconSys. The latter will provide the company’s flagship ArcticPro embedded FPGA solutions with sales and support services in China. Management is also positive about its IP engagement funnel.

Notably, QuickLogic was granted a patent for Flexible Fusion Engine (FFE), which is used for always-on sensor processing in the EOS S3 multi-core processor, by the United States Patent and Trademark Office. 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.

As the world is moving toward voice interfaces like Amazon’s AMZN Alexa, Apple’s AAPL Siri, Alphabet’s GOOGL 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. Thus, 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 2018.

QuickLogic Corporation Price, Consensus and EPS Surprise

QuickLogic Corporation Price, Consensus and EPS Surprise | QuickLogic Corporation Quote

Margins

Non-GAAP gross margin expanded from 31.7% in the year-ago quarter to 42.6% in the reported quarter.

Non-GAAP operating expenses declined from $5 million in the year-ago quarter to $4.3 million.

Guidance

For fourth-quarter 2017, management projects revenues of approximately $3 million (+/- 10%). New product revenues are forecast to be almost $1.2 million, while mature product revenues are projected to be $1.8 million.

Gross margin is anticipated to be approximately 48% (+/- 3%), benefiting from favorable product mix.

Non-GAAP operating expenses are expected to be approximately $4.6 million (+/- $300K).

At the mid-point of guidance, non-GAAP loss is expected to be approximately $3.3 million or 4 cents per share.

For the fourth-quarter, management expects to use cash between $2.8 million and $3.2 million, primarily due to working capital needs and capital expenditure associated with the company’s eFPGA and SoC development effort.

Zacks Rank

QuickLogic has 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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