QuickLogic targets substantial Q4 revenue rebound as SRH FPGA and Australis 2.0 investments shift Q3 outlook

Earnings Call Insights: QuickLogic Corporation (QUIK) Q2 2025

MANAGEMENT VIEW

* CEO Brian C. Faith reported a strategic shift in engineering resources to two critical initiatives: advancing a strategic radiation-hardened (SRH) FPGA test chip on the GlobalFoundries 12LP node and accelerating the release of Australis 2.0. Faith stated, "We strongly believe these initiatives will accelerate storefront design wins for our strategic rad-hard FPGA and expand our served available market to include very high-density eFPGA hard IP designs targeting advanced fabrication nodes and eFPGA designs that require certain advanced capabilities."
* Faith outlined that these initiatives caused a delay in deliverables and revenue recognition for several contracts, decreasing the Q3 revenue outlook but expected to drive a substantial increase in Q4 revenue. "We anticipate ROI from our SRH FPGA test chip initiative beginning in 2026. And if we are successful in winning designs, we believe storefront production contracts could be worth hundreds of millions of dollars in the coming years," Faith explained.
* The company raised capital in June and early July through its ATM facility to support these initiatives.
* Faith announced the passing of Christine Russell, a long-term Board Director and Audit Committee Chair, and the appointment of Ron Shelton to the Board and as Audit Committee Chair.
* CFO Elias N. Nader stated, "Total second quarter revenue was $3.7 million. Total revenue was down 10.7% from Q2 2024 and down 15% compared to Q1 2025. Revenue was below the midpoint of guidance due to lower discrete FPGA revenue and slightly lower revenue recognition from existing IP customers than we had forecasted."

OUTLOOK

* Nader provided Q3 revenue guidance of approximately $2 million, plus or minus 10%, with new products expected to contribute $1.1 million and mature products $0.9 million. "Our decision to focus engineering resources on the tape-out of our SRH FPGA test chip and the accelerated introduction of Australis 2.0 pushed out deliverables and the associated revenue recognition for several contracts. This decreased our revenue outlook for Q3, but it is expected to fuel a substantial increase in Q4 revenue," Nader said.
* Non-GAAP gross margin for Q3 is expected to be approximately 5%, reflecting lower absorption of fixed costs from the anticipated revenue mix.
* Full year 2025 revenue is projected to be modestly lower than 2024, with non-GAAP gross profit margin in the low-to-mid 50% range.
* Non-GAAP operating expenses for Q3 are forecast at approximately $3.2 million, with full year non-GAAP OpEx modeled at $12 million.
* Nader stated, "After interest and other income, we forecast that our Q3 non-GAAP net loss will be approximately $3.2 million to $3.4 million or $0.20 to $0.22 per share."

FINANCIAL RESULTS

* New product revenue in Q2 was $2.9 million; mature product revenue was $0.8 million.
* Non-GAAP gross margin in Q2 was 31% versus 54.4% in Q2 2024 and 47.1% in Q1 2025.
* Non-GAAP net loss for Q2 was $1.5 million or ($0.09) per share, compared to a non-GAAP net loss of $0.7 million or ($0.05) per share in Q2 2024 and ($0.07) per share in Q1 2025.
* Cash at Q2 close stood at $19.2 million, including $15 million from a credit facility. ATM sales during the quarter raised approximately $2.9 million.

Q&A

* Richard Anthony Neaton, Rivershore Investment Research, asked about the ramp potential for the defense storefront business. CEO Faith responded, "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... 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."
* Neaton followed up on customer engagement, to which Faith said, "I'd say in the last few years, the activity has really picked up in that area as far as customer engagement goes... I am talking directly to these customers to know that there is actually an opportunity to serve there that we solve a problem, a fundamental problem that they have budget to do, and they want to use these parts."
* Richard Cutts Shannon, Craig-Hallum, questioned the competitive landscape and differentiation. Faith replied, "There are clearly other FPGAs in the market that are rad-tolerant, less that are rad-hard, none that I know of that are strategic rad-hard and none that I know of that are on GlobalFoundries 12LP."
* Shannon also probed the impact of contract delays. Faith said, "We're being very forthright with our customers. There's no issue with that. They're working with us on those deliveries. And there's no material impact at all to things that we have in our contract."
* Auguste Philip Richard, Northland Capital Markets, inquired about monetizing test chips. Faith explained, "Test chips are our way of proving out IP functionality before we do the production version of that, right, because it minimizes risk and upfront costs when you do that. But you can definitely sell devices to customers for engineering samples."

SENTIMENT ANALYSIS

* Analysts demonstrated a mix of curiosity and skepticism, probing the rationale for prioritizing new investments over near-term revenue, questioning customer engagement levels, contract impacts, and competitive differentiation.
* Management maintained a confident and assertive tone during both prepared remarks and Q&A, emphasizing the strategic necessity and market potential of the SRH FPGA and Australis 2.0 initiatives. Faith stated, "I would not have authorized this PO if I didn't think there was a very high degree of confidence in winning actual revenue, and I'm talking about the hundreds of millions of dollars of revenue if I didn't truly believe that this was a differentiated and very good investment for us and our stockholders."
* Compared to the previous quarter, management's tone shifted from a focus on steady progress and optimism about growth to a more urgent and strategic pivot, defending the decision to sacrifice near-term revenue for longer-term opportunities. Analyst questions reflected increased scrutiny of those trade-offs and sought more granular details, with some expressing surprise at the magnitude of the shift.

QUARTER-OVER-QUARTER COMPARISON

* The current quarter featured a significant strategic shift, with management reallocating resources from immediate revenue opportunities to investments in the SRH FPGA test chip and Australis 2.0, contrasting with the previous quarter's focus on ramping existing IP and storefront contracts.
* Guidance language changed from expectations of solid revenue growth to projecting a modest decrease in full-year revenue, with the narrative shifting to the anticipated Q4 rebound and the exponential potential of new initiatives.
* Key metrics such as revenue, gross margin, and net loss all declined sequentially, while management increased disclosures regarding the impact of R&D and inventory reserves on results.
* Analysts in the current quarter pressed harder on the near-term revenue impact and strategic risks, compared to more future-oriented questions in Q1.
* Management's confidence in long-term prospects was consistent, but the Q2 call included more justification for near-term pain in exchange for future gain.

RISKS AND CONCERNS

* Management cited delays in contract deliverables and revenue recognition due to resource reallocation.
* Gross margin is expected to remain low in Q3 due to unfavorable absorption of fixed costs and product mix.
* The company faces risks from the timing and success of the SRH FPGA test chip and Australis 2.0, as revenue realization from these investments is not guaranteed.
* Supply chain, customer demand, and subcontractor delays continue to be cited as ongoing risks.
* Analysts highlighted the risk of sacrificing near-term financial performance and pressed for clarity on competitive differentiation and customer commitment.

FINAL TAKEAWAY

QuickLogic management underscored that redirecting resources to strategic SRH FPGA and Australis 2.0 initiatives is expected to temporarily reduce quarterly revenue and margin, but these moves aim to unlock significant new market opportunities and are anticipated to drive a major revenue rebound beginning in Q4 and into 2026. The company remains confident that these decisions position it for outsized growth in the defense and high-density FPGA sectors, while acknowledging the near-term financial impact and ongoing risks associated with execution and customer adoption.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/quik/earnings/transcripts]

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