QuickLogic Corporation Price & Performance (QUIK)

Actual results or trends may differ materially from those discussed today including as a result of the company's audit, which is still underway. 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. LiquidLogic 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. May refer to the earnings release we issued today for a detailed reconciliation of our GAAP to non GAAP results and other financial statements. Have also posted an updated financial table on our IR webpage that provides current and historical non GAAP data. Please note QuigLogic uses its website, the company blog, corporate Twitter account, Facebook page and LinkedIn page as channels of distribution of information about its business. Such information may be deemed material information and QuickLogic may use these channels to comply with its disclosure obligations under Reg FD. A copy of the prepared remarks made on today's call will be posted on QuickLogic IR webpage shortly after the conclusion of today's earnings call.

I'd now like to turn the call over to Brian. Go ahead, Brian.

Thank you, Allison. Good afternoon, everyone, and thank you all for joining our fourth quarter twenty twenty four conference call. Due to external delays that pushed out certain contract awards, we reported Q4 twenty twenty four revenue slightly below the midpoint of our guidance. And we will forecast lower Q1 twenty twenty five revenue than we previously anticipated. The good news is the contract logjam that had delayed some key awards by a little over a quarter has now loosened. With two new eF PGA hard IP contracts now in the books, and several more expected in the very near term We anticipate a significant rebound in revenue and profitability beginning in Q2 and solid revenue growth, non GAAP profitability and positive cash flow for full year 2025. Last week, we finalized a $1,100,000 eFPGA hard IP contract with a new defense industrial base or DIB customer that will use the 12 LP fabrication process at GlobalFoundries or GF. Due to the fact we already have eFPGA hard IP established for that process, cash flow will begin in Q1 twenty and revenue recognition will be in Q2 twenty twenty five. [indiscernible] Last week, we were also awarded the first phase of what we expect will be a 7 figure which will be with another new Dib customer.

This application, which enables low power processing of changing algorithms is perfectly suited for our eFPGA solution. We expect to be awarded the balance of this contract in the second half of twenty twenty five. We anticipate design services and IP revenue recognition could begin in Q3 and carry into 2026. Following that, we expect storefront revenue could begin as early as 2027. While some of our existing contracts have good storefront potential that may materialize earlier, this is the first of what we believe will be several direct to storefront contracts during the next couple of years. Earlier this month, we won an eFPGA hard IP design with another new customer. In addition to using a fabrication process for which we have already established our eFPGA hard IP, This design will also use an off the shelf hard IP core for a data converter in a wireless application that we previously developed using our proprietary Australis IP generation tool. The ability to benefit from the work we've completed is a big deal. Having developed IP for fabrication processes and hard IP core design [indiscernible] shortens our development and revenue recognition cycles, and provides us with favorable financial leverage in the form of improved margins.

We anticipate these benefits will start to become meaningful this year. In addition to these recent wins, we announced the award of the fourth tranche of the strategic radiation hardened FPGA government contract valued at approximately $6,600,000 on December 23. This brings the total of our awards through four tranches to roughly $34,000,000 The total potential for this contract including future options is currently $72,000,000 expanded scope of the program and test chip timeline. Turning to Intel 18A. We expect to be awarded the first of two EFPGA hard IP contracts within weeks. And the second one very shortly thereafter. The combined value of these contracts is If the contracts are both awarded and the timeframes outlined by our customer Due to the NDAs and the formal process for press release approval, there may be delays in the announcements of these contracts. Please keep in mind as it stands today, QuickLogic is the only company that has EFPGA hard IP that is optimized for Intel 18A. We believe the significant investments we made during 2024 ahead of contract awards to realize this unique position will provide us with solid returns on that investment going forward. Turning to the competitive landscape.

Last November, Analog Devices announced the acquisition of our most capable competitor, FlexLogix.

This is a clear testament that large semiconductor companies are embracing the value of incorporating EFPGA into their standard products. Following this acquisition, we announced the appointment of FlexLogic former VP of Sales, Andy Jaros, as the new QuickLogic VP of IP Sales. Since FlexLogic's eFPGA IP will no longer be available for licensing, there is a notable void in the market that we can fill. This is particularly true for customers that now need to secure a new long term partner. Andy is working closely with a former FlexLogic's customer that have multiyear QuickLogic Now let me take a moment to update our progress on existing contracts that are scheduled to contribute to our 2025 EF PGA hard IP revenue. A number of these contracts have achieved significant milestones These include tape out and in several cases test chips that have been completed and are invalidation. This is important because in some cases, test ship validation will lead to an IP production license and in a few cases new designs for our eFPGA hard IP. These are also good illustrations that a long tail of revenue is commonly attached to our ESPGA hard IP contracts. And following that a stream of royalties or storefront revenue that can extend for years and in some cases more than a decade.

During the first quarter of twenty twenty four, we announced two contracts that target 12 nanometer processes.

The first contract is with a defense industrial based customer and includes two cores that will be fabricated on the GF-12LP process. We completed our initial deliverables for the first core during Q3 and the second core during Q4. With our IP deliverables complete, we anticipate We will leverage the EFPGA hard IP we developed for this contract to accelerate revenue recognition for the new 12 OP contract I mentioned earlier. The second contract is with a large well known international company. This design is for a new ultra low power SoC based on TSM 12 nanometer process that is targeting a variety of commercial and industrial IoT AI applications. We completed our deliverables on this contract and recognized the associated revenue during Q3. Their test ship has been manufactured and is currently being evaluated by the customer. At which point the customer will make a decision regarding a second design. In November 2022, I shared that we taped out a new device for a customer that incorporates our eFPGA hard IP. While we are in a holding pattern due to a delay with one of the substantial storefront potential starting in a couple of years. Since our last conference call, we have engaged with this customer on multiple new ASIC and chiplet design opportunities that incorporate our eFPGA hard IP.

These designs target other foundries and fabrication nodes for which we have already developed EFPGA hard IP. This means we will be able to recognize revenue fairly quickly if we are successful in winning these engagements. In September 2023, we had [indiscernible] for a design that will be fabricated using GF's 22FDX platform. The customer has completed its design and tape out and test ships are currently in fabrication. Of a production license during the second half of twenty twenty five. [indiscernible] In November 2023, we announced a global semiconductor leader chose our eFPGA hard IP for a design that will be fabricated on UMC's 22 nanometer process. The customer now has a test ship back from fabrication and their evaluations are going very well.

We anticipate continued involvement in their marketing efforts during the first half twenty twenty five and expect the design will generate production IP revenues for QuickLogic this year and royalty revenue beyond. A quick update on chiplets. We attended the Annual Chiplet Summit in January with Your Chip. There was a definite uptick in interest this year. I think Your Chip's CEO Kash Johal is right in his forecast that 2026 will be the year of the chiplet. Which should coincide well with your chip's introduction schedules for merchant chiplets This also dovetails well with the elevated interest we are seeing in AI inferencing at the edge.

As a matter of fact, one of our existing eFPGA hard IP technology for an edge AI inferencing application. While the market for merchant chiplet solutions develops, we are continuing to work with various companies that are targeting in internal ASIC chiplet solutions using our eFPGA hard IP. We already have existing contracts that may evolve to include ASIC chiplet solutions.

In line with our forecast, we released Aurora 2.9 in Q3 AURORA 2.9 includes some very significant enhancements that you can read about on our website Following this, we released Aurora Pro 2.9, which integrates Synopsys' simplify FPGA synthesis software. The integration of Simplify was driven by large strategic customers who worked closely with us during beta testing.

This integration has already helped and we believe many more will follow. We are on pace to include further updates for Aurora with the release of version three point zero later this quarter. The new distributors that we've discussed in some detail during our last two conference calls are executing very well.

In total, they have more than doubled the value of QuickLogic design opportunity they are addressing. While the bulk of this value is for new EFPGA hard IP designs, they are also advancing the new EOS S3 into In line with the forecast I shared last quarter, shipments of EOS S3 increased sequentially in Q4 twenty twenty four and we are forecasting a modest sequential increase in Q1 twenty twenty five. While our primary smartphone customer is scheduled to continue using EOS S3 in new the demand for older designs will likely decrease in 2025. [indiscernible] Turning now to SensiML. Last month, we announced that our Board of Directors is actively there were preliminary discussions regarding the possible sale of the company or its assets. Due diligence is ongoing. So I cannot comment other than we expect a conclusion before our next earnings call and that our full year outlook for solid growth and profitability does not include 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. Elias, please go ahead. Thank you, Brian.

And good afternoon, everyone. Total fourth quarter revenue was $5,700,000 within our guidance range.

Total revenue was down 24% from Q4 twenty twenty three but up 34% compared to Q3 twenty twenty four. New product revenue in Q4 was 4,700,000.0 down 32% from Q4 twenty twenty three, and up 32% compared to Q3 twenty twenty four.

Material product revenue was $1,000,000 up from $700,000 in both Q4 twenty twenty three and Q3 twenty To de The decreases in total revenue on new product revenue from the same period a year ago were mostly due to the timing of certain large EFPGA IP contracts.

Non GAAP gross margin in Q4 was 62% in line with our outlook This compared with non GAAP gross margin of 78.3% Q4 twenty twenty three and sixty percent in Q3 Non GAAP operating expenses in Q4 were approximately $2,900,000 just below the low end of our outlook range. [indiscernible] This compares with non GAAP operating expenses of $3,100,000 in the fourth quarter of twenty twenty three and $3,300,000 in the third quarter of twenty twenty four. Non GAAP net income was $600,000 or $0.04 per diluted share. This compares to non GAAP net income of $2,600,000 or $0.18 per diluted share Q4 twenty twenty three and a non GAAP net loss of $900,000 or $0.06 per share in the third quarter of fiscal twenty twenty four.

The difference between our GAAP and non GAAP results is related to non cash stock based compensation expenses. Stock based compensation for Q4 was $900,000 For the fourth quarter, two customers accounted for temp percent or more of our revenue. At the close of Q4, total cash was $21,900,000 inclusive of an $18,000,000 credit facility. This compared with $22,400,000 inclusive of a $20,000,000 credit at the close of Q3. The timing of payments for accounts receivable and contract assets which resulted in a $2,100,000 increase for the combined accounts impacted our cash usage during Q4. Cash usage during Q4 was also impacted continued development of Intel 18A eFPGA hard IP and the integration of Synopsys simplify ahead of orders. We are anticipating significant IP contract awards that will leverage these investments in 2025 and beyond. Going forward, we do not anticipate developing eFPGA hard IP for new fabrication processes ahead of orders Now moving to our guidance and outlook for the first quarter of fiscal twenty twenty five. Which will end on March 31. Revenue guidance for Q1 twenty twenty five is approximately $4,000,000 plus or minus 10% First quarter revenue is expected to be comprised of and $600,000 in mature products.

As Brian stated in his remarks, our lower than anticipated Q1 revenue guidance is attributable to the delay of certain large IP contracts that we thought we would be awarded late in Q4 twenty twenty four. With the recent wins and significant contracts We expect to close in the very near term that Brian also noted We anticipate a significant rebound in revenue and profitability beginning in Q2. And solid revenue growth non GAAP profitability and positive cash flow for full year 2025. Based on the anticipated Q1 revenue mix, non GAAP gross margin for the first quarter is expected to be approximately 50% plus or minus five percentage points. This is mostly attributable to our lower revenue outlook. We are modeling our full year non GAAP gross profit margin to be [indiscernible] 60% range. Our non GAAP operating expenses are plus or minus 5% We are modeling our non GAAP OpEx to be approximately $3,300,000 per quarter during 2025. Please note that given the niche of our industry, we may occasionally need to classify certain expenses to COGS versus OpEx are capitalized certain costs. The classifications are mainly related to labor and tooling for contracts with customers. Such capitalization may reduce OpEx and alter the timing for recognizing the corresponding expenses in COGS.

This may cause variability in our quarterly gross margins and operating results that we usually balance out at the operating line. After interest and other income, we currently forecast that our Q1 non GAAP net loss would be approximately $1,200,000,000 to $1,400,000 or $0.07 to $0.09 per share.

The difference between our GAAP and non GAAP results is related to non cash Stock based compensation expenses In Q1, we expect these compensation will be approximately $900,000 This is the same as Q4 twenty twenty four and down 42% from Q1 twenty twenty four, As a reminder, there will be movements in our stock based compensation during the year. And it may vary quarter it may vary each quarter based on the timing of grants to employees. Cash flow for Q1 twenty twenty five highly dependent on the timing of certain large contracts anticipate finalizing this quarter. Setting that aside, we are confident that there will be cash flow positive in Q2 and for the full year 2025. Looking back to 2024, we invested heavily ahead of contract awards to become the first and as it stands today, only supplier of eFPGA hard IP for Intel 18A. Also invested to integrate Synopsys Simplified and Aurora, had not been able to charge our customers for its use. To provide us with the flexibility to manage the expanding scope of our large government contract, And the timing and cash flow from large excuse me from large contracts we anticipate Finalizing later this quarter, we will put an ATM in place following this call.

The details of the ATM will be covered in a pro swap which is a prospective supplement, and an eight ks filing with the SEC that will be available before the market opens tomorrow. With this improved flexibility, we are very well positioned to leverage the benefits of the aforementioned investments as we recognize revenue from recently awarded and pending contracts beginning in Q2.

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

And thank you and your team for tight management of our finances that helped us realize a second straight year of non GAAP profitability. [indiscernible] We are very excited about our unique positioning as the only company currently offering eFPGA hard IP that is optimized for Intel 18A.

Believe the investments we have made during the last nine months to achieve this unique position ahead of contracts we'll deliver solid ROI beginning this year. Inclusive of 18A, we have established eFPGA hard IP for six unique fabrication process technologies. We anticipate expanding this to nine or possibly 10 during 2025 with all new processes being funded by customer contracts. We expect this expansion to be weighted towards TSMC fabrication In addition to these, we expect to win new contracts for fabrication process processes where we have already established EFPGA hard IP. This means with those investments in our rearview mirror, New contracts will generate higher profit margins and higher positive cash flow. [indiscernible] An example of this is the new contract targeting GF's 12 LP that I mentioned earlier. We anticipate our first direct to store front contract that I also mentioned will leverage this benefit too. We have extended this benefit in a recent win to include the leverage of off the shelf hard IP core designs we've developed. In this case, the customer will use our EFPGA hard IP core that we previously developed. In short, we are beginning to see the momentum and leverage provided by our past developments.

These benefits will become more evident as we move forward. While the defense industrial base will continue to be a very We expect to further diversify our end markets during 2025. [indiscernible] In addition to expanding our fabrication process coverage, signing contracts with new customers and broadening the end markets we serve, we believe we will also win new designs with our existing customers. Several of these opportunities were highlighted earlier in my prepared remarks and several others are a bit too early in the process to discuss today. In short, once customers adopt a a specific supplier's programmable logic and user tools in a design, they become sticky. And are used in future designs. We are already seeing evidence of this benefiting QuickLogic QuickLogic. With that, I would now like to open the call for questions.

And first question comes from the line of Richard Shannon with Craig Hallum, Well, hi, Brian Elias. How are you guys doing?

Doing well. How are you, Richard? Doing fine. Thank you. Well, let's see here. Obviously, you're giving us a guide here for the first quarter.

But I think it's more interesting to think about, what you have in mind for the second quarter. You're talking about a sizable increase here.

Then just want to make sure I've got the kind of the parameters you're thinking about kind of breakeven and the profitability levels you're expecting for the year? And then probably a couple of follow ups on that. I can definitely take the first question, Richard. On the Q1 to Q2 transition. So The IP design pushes that we had talked about in the call starting from the late part of Q4 One of those is that $1,100,000 one that was the first bullet of our earnings release today and what we went over in brief detail in the opening remarks. In full. To be recognized second one is this one related to 18A. We've been public that we felt like this is sort of a mid 7 figure deal and that would all be in Q2. And so when you add those two up and you look at sort of the baseline of revenue today, being in that sort of two ish and up time or dollar value kind of paints the picture of Q2 being north of 6%, which is I think coinciding with The non GAAP profitability and cash flow positive in the model. For moving forward?

Does that answer your question? Yes.

Yes. Very high level. I'll probably think about that and follow-up some other ones here. Brian, I did hear you talk about a funnel, which you talked about for at least a year and a half here. Not sure if that's something you're going to continue to do or not, but how do we think about that and whether you continue to use that metric as a way to judge how things are Yes. I'm glad you asked that question because we intentionally did not talk about the funnel in terms of quantitative numbers today. I will say quantitatively, it is up on a net basis, primarily from new EFPGA opportunities coming into the funnel. Given this is the first call of the year, and given the feedback that we have been receiving over the last year from investors and other folks in that community, decided that we're going to try to get away from actually putting out the actual number for that and focus on these hard IP contracts that we're talking about, these development contracts because that's really where the rubber hits the road. Qualitatively, I will say that the funnel did grow from where it ended on our Q3 call.

Till now and most of that growth was in the eFPGA part of the business. Okay. All right. Fair enough here. Maybe let's touch on Intel AT and A. An increasing amount of focus over the last few quarters on this seems very interesting. I guess my my question is twofold. How do we see the opportunities from this node? And how many different customers might we see develop over this year here? [indiscernible] as I get questions related to Intel generally across more than one of my coverage companies here, everyone's worried about potentially Intel getting broken up in some manner, which obviously hasn't been announced here. What's your response to people's worries about risk from that situation.

Yes.

I mean, firstly, let's talk about my view of what I've I felt for a while, but what I've heard from others just on the overall demand for H and A. Think that if you look at really advanced process technology that's done onshore in The U. S. The established foundries, especially The U. S. Owned foundries Their sort of end of the line is 12 nanometer or 14 nanometer depending on how you want to talk about process technology. There are more aggressive ones, but they're by foundries that have foreign ownership. So Intel being U. S. Owned AT and A is clearly more advanced than a 12 or 14 nanometer node. And I think there's a lot of interest from the government and the defense industrial base to have that sort of capability physically onshore and operated by a U. S. Operated or own foundry. So for those reasons, I think there's a lot of promise for the And I think there are several companies that Intel has talked about with respect to adopting AT and A. If you sort of parse that into two, there's the defense and then there's the non defense side with the government oriented the government oriented side.

And I think that there are a lot of interest within The U. S. Government or The U. S. Defense base for 18 A because of the power of the performance in the area gains of some advanced process like this. For that reason, I think regardless of whether Intel remains as Intel or is in different parts, I think that there's still going to be the strategic interest in that particular process node. And I think very recently, think it was even last week Intelfoundry announced that they are now ready for production tape outs on AT and A. So my hope is that we'll start to see more companies publicly acknowledging that they're interested or designing for AT and A And should they be needing or wanting or exploring adding programmability to those ASICs, then we're going to stand ready to be the first and only IP provider for EFPGA to enable that. If you think about it, the more expensive it is to design a chip from an NRE perspective from IP acquisition, from mass sets and so on, the more value EFPJ actually has to that ASIC because you don't want to redo a very expensive ASIC very often.

You want to have it serve a lot of use cases, a lot of end markets And in fact, eFPGA is exactly how you do that at a silicon level. [indiscernible] I believe Intel AT and A is going to be successful. I think we will be successful with it. We have more than one customer in our opportunity funnel. I think the fact that we did make that investment speaks to that conviction that it's going to be a successful node for us and if they want eFPGA IP, those ASICs then going to be that guy. We're going to be that supplier we're going to see more than one win this year on that.

Okay. Maybe two questions for me and I'll jump out of line First one is related to FlexLogix. I think your commentary was that the recently hired VP of IP Sales is working hard to work with prior licensees or maybe those who were in process here. What kind of a timeframe do you expect to convert those or get subs your funnel and in bookings and then also meet revenues. Would you call this a shorter period of time or longer one or how would you characterize that?

Would definitely say it's shorter and the $1,100,000 win that we talked about in the first bullet of our earnings release is actually one that Andy helped close. And I would say accelerate faster than what it may have just naturally. I think that there's a lot of efficiencies that we can get from an organization when you have somebody in sales that knows where the fish are. And him being in FlexLogix, he clearly knows the parts of the pond to drop the line. And I think he understands the technology very well having sold it for eight years and that's really helping from an efficiency standpoint and also just the communication of the value proposition. I think that combined with those long term relationships he has Speaks well for the future and you don't have to trust me on that because that first order was What's his order?

Okay.

That sounds great. My last question for you, Brian, before I jump out of here is I'm trying to find my notes on your comments here at the very end of the call here. Talked about kind of diversifying end market [indiscernible] Can you talk about where this is coming from? How this overlaps with the nodes you're working on? Maybe just expand on that. I'm not sure we're I mean, it's obviously great to see diversification, but give us any more detail as to how that develops over time. Yes.

So we had already started to see some opportunities last year that were outside of the areas of aerospace and defense which has obviously been our mainstay market. And I'd say that that part of the funnel has grown even faster with Andy coming on board because a lot of the engagements that I think FlexLogic said was also outside of the areas of aerospace and defense. And if you go back in time, you can see that where we had been proactively investing in process technology ports was sort of intentionally not trying to directly overlap with FlexLogic. Right? We don't want to go someplace where somebody already is because that becomes more of a price war than anything else. With the acquisition by Analog Devices, now we can more purposely go after those other nodes like the TSMC ones I mentioned earlier, knowing that there is more of a greenfield there.

So again, you'll start to see that this year and that's done in concert with opportunities outside of aerospace and defense. So we have industrial now coming in. We have some communications in our funnel now. Even have some consumer ones believe it or not. And so I think that [indiscernible] I think we're going to close some of those and those will drive new process technology ports that we haven't done so far. And we want that balance But like I've said many times, I don't see that aerospace and defense is ever going be less than 50% of our revenue just because that is such a prevalent market for programmable logic technology in general. And the other thing I'd say, and this ties back to Andy for a second, He's coming in and he's knowing where the likely targets are or where we should focus our energy to help convert over if they're interested to QuickLogic. And I think he also understands how to leverage his team really well because this after all is a team sale. Bringing in the architects and the technical team. And those are resources that are very scarce. In our company. We do need to be very mindful of we bring them in and how much time we do to really focus on efficiency.

And I think he's got that mindset that speaks well for this $1,100,000 one in you're going to see that efficiency in this notion of selling cores that we already have done as opposed to needing to do custom work for a customer. Faster time to revenue, better use of resources. Okay. Excellent. We look forward to seeing more of that. I will jump in the line. Thanks, Labrienne. Thanks, Richard.

As a reminder, And the next question comes from the line of Martin Yang with Oppenheimer and Company. Hi.

Thank you for taking my question. First question, U. S. And the benefit you get from distributors into new regions, do you think that revenue rent you see there could continue throughout 2025 or that follows more through normal seasonality. Could you repeat the last part of your question, Martin?

Yes. Will that contribute $25,000,000 revenue or what else? Yes. In '25 revenue, the benefit you get from having the additional distributor or that help your U. S. Three family revenue to continue to go go up in the sequential quarters.

They definitely will. I mean, so Really good. External sales partners, whether they're reps or distributors, offload our direct resources to really spend time on more strategic accounts or pre filtering designs before they come into the funnel and consume resources. So I do think we will be generating revenue this year both from an IP, hard IP licensing as well as EOS S3. I was just on the phone with one of our guys today talking about a new EOS S3 opportunity from a distributor. So they continue to come in even though it's a mature product.

A great product for distributors to sell being EOS S3 because it's very It's stable in all the support infrastructure, software, silicon, boards, etcetera. They can run with it. And then just bring our guys in when they need to do deal closing. On the IP side, it actually frees up the sales folks to focus on the more strategic sales that some cases need more evangelizing before we get to a deal. But bottom line is we'll see I think revenue contribution this year from the distributors and new reps and that will also help accelerate more from our direct guys directly.

Got it. Thank you.

And then one question on the potential broader use of [indiscernible] Edge AI inference. You referenced one customer. Can you maybe elaborate on how that customer is utilizing FPGA? In their applications and what verticals are they in?

Yes, I'm happy to do that. [indiscernible] if you go back in time and I'm talking a few years now, We collaborated with a university in Europe called ETH in Zurich. In Switzerland. And there was a group there that does a lot of research around parallel ultra low power processing. In semiconductors. And so a lot of what they were looking at is how do I reduce the computational energy required to do AI inferencing using RISC V processors and some RISC V processors actually came out of that research. And then how can I minimize that power or energy consumption even further by augmenting that with embedded FPGA? And so we did this joint research project with them and we actually published that research together in a joint paper. And it showed that the energy consumption if you use embedded FPGA to offload computationally intensive convolution algorithms You can reduce energy by like 20 x Now when a battery powered system a 20x energy savings is a big deal. Right? It's a big deal in the data center. It's a big deal when you're dealing with batteries. So that paper became the basis of how we would talk about the benefit the benefits of EFPJ with other prospective customers, not just this university.

And the 12 nanometer TSMC eFPGA win that we talked about last year was sort of inspired by the outputs of that paper. And so that's the one that has the silicon back and they're going through the silicon validation and I'm hopeful that that will turn into another EFPGA win after they've gone through that. Clearly, they're Their validation is going to involve running algorithms and measuring power consumption both with and without the EFPGA contributing to the workload. And see if there's a net gain there. But based on what we found in that paper, me, the published results speak for themselves. And I'm pretty bullish about that. Clearly, we want to get beyond just that one customer, but I think the more more demonstrable numbers we have coming from this customer to supplement that one with ETH and Zurich will be used [indiscernible] sales collateral with other customers as well.

But it's to be clear, it's not like the It's not the training, the heavy duty Sort of. Iron that you see today that people are doing the GPUs. We're talking about much further out of the just the inferencing part batteries and power matter.

Got it. And just to clarify, so that customer, is that the larger well known international customer?

That is correct.

And then my last question is on our revenue phasing this year so you expect a very significant step up for 2Q. And what are can you maybe talk about some of the puts and takes the quarterly revenue patterns in the second half.

So like like what we're mentioning qualitatively for Q2, it's going to be driven from embedded IP contracts. We are clearly planning on the continued investment by the U. S. Government in this throughout the year and then layering into that now more of these embedded FPGIP designs. So we talked about the two big ones here, contributing to Q2. We have several more of these 7 figure ones layering in an opportunity timing for Q3 and Q4 revenue recognition All of the ones that are looking into our our financial planning on the revenue side or ones we already have in the funnel we've engaged with for some time And again, these are ones that we are targeting for these newer IP cores that we've developed, which are on more advanced process technology, which are higher average selling price, which means we don't need as many licenses to have significant revenue contributions in those quarters. Moreover, The fact that we have already ported to a node and or designed an actual core for a customer means that our operating expenses to do customer specific derivatives for those new opportunities is much less. And that's why we're I think really pleased with those developments and how we should see better gross profit margin And cash flow, the second half because a lot of that investment has already taken place.

Lot of leverage there in the model. [indiscernible] Yes. That's it for me. Thank you. Fantastic. Thank you. And the next question will come again from the line of Richard Shannon with [indiscernible] two more questions. The first one is just regarding the strategic RadHard opportunity How do we think about the revenue opportunity here versus past years? I know there's not a complete overlap between kind of the phases here and the work going on with one or more foundries here to that should be elaborated clearly on exactly what that looks like for this year, but maybe just want to get to the to the end conclusion here how to think about the revenue contribution this year for versus last year, last few years on this project.

Sure. So from a revenue [indiscernible] sort of at the same level plus or minus a little bit as last year. There is some pretty interesting things I'd like to share about the latest contract, but as I put in the script, we are still seeking permission to talk in more detail and openly about those. Before I can do so publicly. But I am really excited about the things that we are doing this year for that [indiscernible] like I said, the revenue should be plus or minus sort of in that same range as last year. [indiscernible] could be a little bit less I think what you'll see from the output you'll be quite pleased.

Okay.

I look forward to seeing that. And related to strategic Red Heart here, is this sounds like things are mostly on track in terms of timing. Wondering if you agree to that? And then if that's the case, what kind of timeframe do we think about for getting the start of and or even material or noticeable storefront revenues That is a question I'm going to need to punt until I get permission to talk about the stuff I'd like to talk about, if that's okay with you.

Well, since the government says so, I guess we'll have to both be satisfied with that answer. Maybe I'll ask another one as my last one then Brian here, which is used a phrase that maybe I've missed out on or not sure I quite understand you talking about direct to storefront. What exactly does that mean?

Yes, this is the first time we've introduced that. Direct to prelude or preamble. So when we talked about Storefront in the past, this has been where we are not just doing an IP core for a customer, we're actually doing a chip design for a customer, some of which must include embedded FPGA, the intention being that if we do the chip design, not only do we get the NRE for that, but we more importantly want to do the storefront sales and support of that to that customer. So as an example like the strategic router at FPGA falls into that category, right? Development revenue is great. We're doing this design for the government. Ultimately, we want to do this so that we can be the storefront for that chip. So in a direct to storefront concept, evaluating whether they want to do an EFPGA core. Like they are doing a deal with us where the first phase of the contract is clearly about specifying what this device looks like. And from day one, they would want this to be a storefront deal with QuickLogic. So the direct to storefront is sort of saying that we're circumventing a lot of this drawn out evaluation back and forth.

Do I want you to do the designs? Do I want to work with third party? We're engaged with them on this whole path from day one that it's direct to storefront. So that's good. The customer is putting some skin in the game right now.

Working closely from an engineering perspective to and then we can move into contract for implementation, like I said, hopefully starting in Q3.

Okay.

Fair enough. And that's all from you guys. Thank you. Thanks, Richard. Thank you. There are no further questions at this time. I'd like to turn the call back to Brian Faith for closing remarks.

Yes. And I know that some of our other analysts were having some maybe planned or unplanned connection issues. So we'll make sure that we connect with them offline after the call at some point. Thank you everybody for attending the call today. I'd like to update on some events and actually a lot of events in this next quarter. We're going to be quite busy with external events. So tomorrow, we have the Oppenheimer tenth Annual Emerging Conference. That's a virtual If you're interested in that contact your Oppenheimer rep. March 6, we'll be at the Starting five virtual conference, March 11, in Washington DC, the HNTEL Public Sector Summit March 2020 will be at GOMAC in Pasadena.

If you government microelectronic work, that's a great show to go to. We'll be at Hart in Monterey, April 7, to eleventh, again very oriented around radiation hardened semiconductor technology. April 19, InSOL Foundry Forum. We've been talking about AT and A. We'll be at Intel Foundry Forum in San Jose. And then lastly, April 29 will be at the Andy's Risk five Conference in San Jose. As always, thank you for your time and support.

And we will talk to you next time. Thank you.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Enjoy the rest of your day.