QuickLogic (QUIK) Q3 2026 Earnings Call Transcript

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Motley Fool Transcribing, The Motley FoolWed, November 11, 2026 at 4:11 PM UTC

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Nov. 10, 2026

CALL PARTICIPANTS -

President and Chief Executive Officer-Brian C. Faith

Senior Vice President of Finance and Chief Financial Officer-James Sullivan

TAKEAWAYS -

Revenue -- $5.1 million, representing a 153.2% increase year over year driven by growth in new products.

New Product Revenue -- $4.0 million, growing 324.4% year over year and accounting for 79% of total revenue.

Mature Product Revenue -- $1.1 million, decreasing 33% compared to the second quarter of 2026.

Non-GAAP Gross Margin -- 41%, decreasing from 46.8% in the previous quarter due to unfavorable absorption of fixed costs and a larger allocation of R&D expenses to cost of revenue.

Non-GAAP Net Loss -- $1.3 million, or $0.07 per share, compared to a loss of $3.2 million in the prior-year period.

Net Cash -- $14.2 million, excluding a $5 million drawdown from the company line of credit.

ATM Program Proceeds -- $9.5 million, providing liquidity through net proceeds from sales during the first half of 2026.

Q4 Revenue Guidance -- $8.0 million, plus or minus 10%, reflecting expected intellectual property contract finalizations.

Q4 New Product Revenue Guide -- $7.3 million, supported by anticipated intellectual property and related services revenue.

Q4 Non-GAAP Gross Margin Guide -- 55%, plus or minus 5%, based on an anticipated change in the revenue mix.

Full Year Revenue Guidance -- 72% year-over-year growth, driven by expansion in intellectual property licensing and services.

Full Year OpEx Guidance -- $13.3 million to $13.4 million, representing a reduction from the previous estimate range of $13.7 million to $13.9 million.

U.S. Government Contract -- $89 million total ceiling value, with a new tranche anticipated to be awarded in the fourth quarter.

Automotive Design Win -- A six-figure eFPGA hard IP win for battery management and robotic applications using a 16-nanometer process.

Intel 18A-P Contract -- A 1 million LUT contract currently in negotiations, delayed from the third quarter to include storefront provisions.

Chiplet Initiative -- Five active proposals targeting Intel 18A, 18A-P, and GlobalFoundries 12LP processes to address onshore supply chain demand.

GlobalFoundries Contract -- $2.7 million ceiling value, with a second phase negotiation to co-develop a new FPGA chiplet using 22 FDX technology.

Mature Product Package Market -- Multimillion-dollar potential market opportunity for smaller package versions of existing devices funded by a strategic customer.

RadPro Evaluation Kits -- Continued delivery of development kits expected to drive initial storefront device demand in 2027.

IP Portfolio -- Nine unique fabrication processes supported via the Australis IP generator, broadening customer base penetration.

Profitability Outlook -- Non-GAAP profitability expected for the second half of 2026, benefiting from top-line growth and expense management.

Cash Flow Guidance -- Cash flow positive operations expected for the full year 2026, despite anticipated breakeven performance in the fourth quarter.

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RISKS -

CFO Sullivan reported that gross margin performance was impacted by "unfavorable absorption of fixed costs with lower revenue and a larger than expected allocation of R&D expenses to cost of revenue."

CEO Faith noted uncertainty regarding the timing of government funding, stating, "we do not know when the next tranche is literally coming in until it comes in."

QuickLogic Corporation (NASDAQ:QUIK) reported a 153.2% year-over-year revenue increase for the third quarter and provided guidance for 72% top-line growth for the full year 2026. Management attributed the lower-than-midpoint third quarter revenue to extended negotiations for a 1 million LUT contract to include storefront provisions. The company expects these negotiations to conclude in the fourth quarter, contributing to a forecasted 55% sequential revenue increase. Strategy remains focused on expanding the intellectual property business, specifically through eFPGA hard IP and a growing chiplet initiative targeting defense and industrial sectors.

CEO Faith stated, "2026 is on track to be a very good year for QuickLogic," citing momentum in customer base expansion and end market penetration.

Management indicated that the current government contract is limited to development activities and excludes storefront device sales.

The company is leveraging its Australis IP generator to deliver customer-specific hard IP for the automotive and industrial robotic sectors on a 16-nanometer process.

CFO Sullivan noted that the forecasted 12% growth in non-GAAP operating expenses against 72% revenue growth "illustrates the strong inherent leverage of our IP business model."

QuickLogic expects to introduce a 12LP evaluation kit in late 2026 to accelerate customer evaluations of discrete and chiplet FPGA designs.

The company reported five active chiplet proposals targeting Intel and GlobalFoundries processes, with several expected to offer storefront solutions in 2027.

INDUSTRY GLOSSARY -

eFPGA: Embedded Field Programmable Gate Array, intellectual property that allows for reconfigurable logic within an ASIC or SoC.

LUT: Look-Up Table, a fundamental building block used to implement logic functions in FPGAs.

ASIC: Application-Specific Integrated Circuit, a microchip designed for a special application rather than general-purpose use.

Rad-Hard: Radiation Hardened, electronic components designed to be resistant to damage or malfunctions caused by ionizing radiation.

ATM: At-The-Market, a type of equity offering that allows a company to sell shares directly into the secondary market over time.

Australis: QuickLogic's proprietary tool used for the rapid generation of eFPGA hard IP.

Chiplet: A discrete integrated circuit block designed to be combined with other similar blocks in a single package to form a larger system.

PPA: Power, Performance, and Area, the primary metrics used to evaluate semiconductor designs.

18A-P: An advanced semiconductor manufacturing process node developed by Intel.

Antifuse: A non-volatile programming technology that creates a permanent electrical connection, often used in high-reliability aerospace applications.

RadPro: QuickLogic's specific platform for radiation-tolerant FPGA development and testing.

Full Conference Call Transcript

Operator: Ladies and gentlemen, good afternoon. At this time, I would like to welcome everyone to QuickLogic Corporation's Third Quarter Fiscal 26 Earnings Results Conference Call. As a reminder, today's call is being recorded for replay purposes. I would now like to turn the conference over to Ms. Alison Ziegler of Darrow Associates. Ms. Ziegler, please go ahead.

Alison Ziegler: Thank you, Sherry, and thanks to all of you for joining us. Our speakers today are Brian C. Faith, President and Chief Executive Officer and Jim Sullivan, Senior Vice President of Finance and Chief Financial Officer. As a reminder, some of the comments QuickLogic makes today are forward looking statements that involve risks and uncertainties, including, but not limited to, statements regarding our future profitability, revenue growth and cash flows, expectations regarding our future business and statements regarding the timing, milestones and payments related to our government contract; statements regarding expected contracts and the expected magnitude of such contracts, statements regarding the likelihood and timing of storefront opportunities, and statements regarding expected adoption rates and or orders by our customers.

Actual results may differ due to a variety of factors, including delays in the market acceptance of the company's new products, the ability to convert design opportunities into customer revenue, our ability to replace revenue from end of life products, the level and timing of customer design activity, the market acceptance of our customers' products, the risk that orders may not result in future revenue, our ability to introduce and produce new products based on advanced wafer technology on a timely basis, our ability to adequately market the low power competitive price and short time to market of our new products intense competition, ability to hire and retain qualified personnel, changes in product demand or supply, general economic conditions, political events, international trade disputes, natural disasters, and other business interruptions, that could disrupt supply or delivery of or demand for the company's products; and changes in tax rates and exposure to additional tax liabilities.

For more detailed discussions of the risks, uncertainties, and assumptions that could result in these differences, please refer to the risk factors discussed in QuickLogic's most recently filed periodic reports with the SEC. QuickLogic 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. You may refer to the earnings release we issued today for a detailed reconciliation of our GAAP to non GAAP results and other financial statements. We have also posted an financial table on our IR web page that provides current and historical non GAAP data.

Please note QuickLogic uses its website, the company blog, 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 Regulation FD. A copy of the prepared remarks made on today's call will be posted on QuickLogic's IR webpage shortly after the conclusion of today's earnings call. I will now turn the call over to Brian. Go ahead, Brian.

Brian C. Faith: Thank you, Alison. Good afternoon, everyone, and thank you all for joining our third quarter 26 conference call. 2026 is on track to be a very good year for QuickLogic. Beyond our revenue growth, we have expanded both our customer base and end market penetration. With this momentum, we believe we are very well positioned to continue the growth of our IP business and generate material storefront revenue in 2027. As our new CFO, Jim Sullivan, will cover in his presentation, we will guide for a 55% sequential revenue increase in Q4 resulting in a full year outlook of 72% year over year revenue growth.

With this top line growth, we are also anticipating non GAAP profitability for the second half of 26 and cash flow positive operations for the full year. As I am sure you are aware, Q3 revenue was below the midpoint of our guidance. This is due solely to the fact that the customer for the 1 million LUT contract targeting Intel 18A-P extended the scope of our negotiations to include a storefront provision. While this delayed the signing of the contract, it significantly expands the long term revenue potential for QuickLogic and broadens our partnership with the customer. We expect to finalize this contract and recognize IP revenue during Q4.

This is 1 of several examples I will share with you today that illustrate how we are leveraging our decades of experience in managing third party IP fabrication, test, package, and logistics, to provide storefront solutions for our customers. At the foundation of our anticipated Q4 growth, is our ongoing contract with the U. S. Government, which was increased last year to a total ceiling value of $89 million. We are forecasting the award of a new tranche later in Q4 with revenue recognition contributing a significant percentage of our forecasted Q4 revenue.

With 2 tape outs funded by this next tranche, of the contract are planned in early 27, we believe there will be enough finished devices for us to support initial production quantities through our storefront initiative beginning in late 27. We continue to receive and deliver orders for our RadPro dev kit during Q3. We expect this growing interest to continue, and with the number of evaluations already underway, we are very optimistic that we will see initial storefront device demand in 2027. Beyond our US government contract, and our internally developed RAD Pro devices and dev kits, we have a number of ongoing and new contracts that we expect will contribute to our forecasted Q4 revenue growth.

Due to our ratable revenue recognition policy, most of these contracts will also contribute to our anticipated growth in 2027. In an October 13th press release, we announced our first eFPGA hard IP win in the automotive and industrial robotic sectors. This is 1 of several examples of our success this year in broadening both our customer base and end market penetration. In this application, the ASIC uses our eFPGA hard IP to enable its core battery management and motor control functions to adapt to changing market requirements and use cases. This flexibility allows the ASIC to be programmed to support a wide variety of automotive and industrial robotic platforms. Increasing its potential annual volume extending its product life cycle.

The ASIC will be fabricated on a 16-nanometer process that is commonly used for automotive ICs. While this is our first delivery of eFPGA hard IP for this process, we are leveraging our proprietary Australis IP generator to deliver customer specific hard IP very quickly and with minimal engineering expense. The IP revenue from this contract will be recognized ratably beginning in Q4, And once the ASIC is in production, QuickLogic will receive an ongoing stream of royalty revenue. We are forecasting a contract award later this quarter from a major U. S.-based fabless semiconductor company that intends to leverage the advantages of our eFPGA hard IP in a new IC targeting biomedical applications.

In this design, our eFPGA hard IP will be used for inference and signal processing applications in physical AI. Inference in physical AI is the process of running a trained AI model on real world sensor data. To make decisions or take actions in the physical world. If we are successful in securing this contract, IP revenue will be recognized ratably beginning in Q4, and once the IC is in production, QuickLogic will receive ongoing royalty revenue. Several years ago, a company that designed ASICs for the defense industrial base, or DIBs, decided to go with 1 of our competitors.

This company has reached out to us and expressed its desire to move to our eFPGA hard IP for new designs. We are working closely with this potential customer on a new 22 FDX design and believe there is a good potential of finalizing a contract in Q4. Last quarter, I provided you with an initial briefing on what we believe will be our second architectural IP license. Earlier in 2026, this customer awarded us a 5 figure feasibility study contract to evaluate our eFPGA hard IP for its unique application. The goal of the study is to determine if a custom implementation of our IP will meet its PPA requirements on its proprietary fabrication process.

The evaluation is going well. But we have been advised that we will likely extend into early 27. We are also working closely with this new potential customer on an ASIC design that will target Intel 18 AP. The technical evaluation and negotiations have been completed, and we are optimistic the customer will receive funding for this program during the next 6 months. On May 13th, we announced a contract with a $2.7 million ceiling value. In the first phase of this contract, we taped out a discrete FPGA that fabricated on the GlobalFoundries 12 OP process. In line with our previous forecasts, we have received the test chips from GlobalFoundries, and they are in assembly now.

We have scheduled the introduction of a 12LP eval kit in late Q4 that incorporates this chip. The eval kit will be compatible with common third party development environments, used by both DIB and commercial customers. This enables customers to accelerate evaluations of discrete and chiplet version of the design that we may offer as storefront solutions beginning next year. We are now in the final stages of negotiations with the customer for the second phase of this contract, that will extend its value to within $50,000 of the $2.7 million ceiling. In this phase, we will work closely with Yochip to co-develop a new FPGA chiplet.

That will be fabricated using the GlobalFoundries' 22 FDX process and be co-packaged with the original 12 OP test chip. This new FPGA chiplet will enable connectivity between legacy silicon and newer devices with modern interfaces. If we are successful in winning this contract extension, revenue recognition would begin in late Q4 and extend into 2027. As demonstrated by the ongoing revenue from our products that were introduced decades ago, certain defense and aerospace applications continue to benefit from the locked in 1 time programmable anti fuse technology. Beyond the ongoing demand and several new design wins for our existing mature products, certain DIBs have shown an interest in smaller packages than we currently offer.

1 in particular has contracted with us to fund and qualify smaller package versions of existing devices for new designs. We have samples of these new solutions in house and are on track to ship them to customers along with our FPGA user tools and device programming capability this quarter. Our evaluation of this opportunity suggests it could become a new multimillion dollar market for QuickLogic that requires only a minimal ongoing operational investment. Based on our customers' forecast, we expect initial revenue will begin during the first half of 27. Our chiplet initiative has established solid traction during 2026. And we expect it will accelerate in 2027.

We have 5 active proposals that include designs targeting Intel 18A, Intel 18A-P, and GlobalFoundry's 12LP fabrication processes. Several of these devices may also be offered as storefront chiplet solutions in 2027. In addition to these, as I mentioned earlier, we have a pending contract for a chiplet design that we will codevelop with our partner, Yochip, that we may also offer as a storefront solution. This chiplet will be fabricated on the GlobalFoundries' 22 FDX process and funded within the scope of the $2.7 million eFPGA hard IP contract. Given the tangible progress we have logged during 2026, I believe chiplet solutions will make a meaningful contribution to our revenue beginning in 2027.

With that, I will turn the call over to Jim for his presentation of financial data. Jim?

James W. Sullivan: Thanks, Brian. Hello, everyone. it is good to be here speaking with you today. Now to our results. Total third quarter revenue was $5.1 million This was up 153% from Q3 2025 and down 6% from Q2 2026. As Brian previously covered, the sole reason revenue was below the midpoint of our guidance range was because the customer extended the scope of our negotiations for a specific contract to include a storefront provision. We expect to finalize this contract and recognize IP revenue during Q4 2026. New product revenue in Q3 2026 was $4 million, mature product revenue was $1.1 million. New product revenue was 324%, from Q3 2025 and down 13% compared with Q2 26.

Mature product revenue was 2% compared with Q3 2025 and down 33% from Q2 2026. Non-GAAP gross margin in Q3 was 41% compared with -11.9% in Q3 2025 and 46.8% in Q2 2026. This was below our outlook due to unfavorable absorption of fixed costs with lower revenue and a larger than expected allocation of R&D expenses to cost of revenue. Non GAAP operating expenses in Q3 2026 were approximately $3.3 million compared with $2.9 million in Q3 2025 and $3.5 million in Q2 2026. Due to expense management and the allocation of certain R&D costs from operating expense to cost of revenue, Q3 2026 operating expenses were below the $3.6 million mid midpoint of our outlook.

Q3 2026 non-GAAP net loss was $1.3 million or a loss of $0.07 per share. This compared with a non GAAP net loss of $3.2 million or a loss of $0.19 per share in Q3 2025 and a non GAAP net loss of $1.1 million a loss of $0.06 per share in the second quarter of fiscal 2026. The difference between our GAAP and non GAAP results for Q3 was attributable to non cash stock based compensation expenses and restructuring charges. Stock based compensation for Q3 2026 was approximately $900,000 consistent with our outlook. Stock based compensation was $800,000 in each of Q3 25 and Q2 26.

Restructuring costs were $34,000 in Q3 2026 compared with 0 in Q3 2025 and $16,000 in Q2 2026. For the third quarter, 2 customers accounted for 10% or more of total revenue. At the close of Q3 2026, excluding a $5 million drawdown from our line of credit, net cash was $14.2 million. Our positive cash flow for Q3 benefited from the timing of certain payments, which were subsequently made in Q4. This $14.2 million net cash balance compares favorably with our projection of $13 million and with the $3.8 million in net cash we reported at the close of Q4 2025.

The increase of $10.4 million in net cash for the first 3 quarters of fiscal 2026 includes approximately $9.5 million of net proceeds from sales under our ATM program during the first half of 2026. Now moving to our guidance and outlook for our fourth fiscal quarter, which will end on January 3, 2027. Based on backlog and customer forecasts, our total revenue guidance for Q4 2026 is $8 million plus or minus 10%. We expect total revenue to be comprised of $7.3 million in new product revenue, and $700,000 in mature product revenue. Based on the anticipated Q4 revenue mix, non GAAP gross margin for the fourth quarter is expected to be approximately 55% plus or minus 5%.

Taking the range of our Q4 outlook into consideration, our full year 2026 non GAAP gross margin is expected to be 47%, plus or minus 5%. In accordance with GAAP and consistent with industry practice, we record certain labor and tooling expenses associated with our IP contracts as cost of revenue. Rather than operating expenses. In addition, we also record the depreciation and amortization related to certain capitalized costs and CAD tools as cost of revenue. These cost allocations can cause variability between gross margin and operating expenses quarter to quarter. Although they do not affect total operating results. With that in mind, our Q4 non GAAP operating expenses are expected to be approximately $3.2 million plus or minus 5%.

Based on this and our lower than anticipated Q3 non GAAP operating expenses, we are reducing our full year non GAAP operating expense outlook to a range of $13.3 million to $13.4 million from our previous estimate of $13.7 million to $13.9 million. The forecasted growth of approximately 12% in non GAAP operating expenses over 2025 as compared to our outlook for 72% revenue growth illustrates the strong inherent leverage of our IP business model. After interest and other income, we are forecasting fourth quarter non GAAP net income of approximately $1.3 million or approximately $0.07 per common share on both an outstanding and diluted basis.

Based on this outlook, we also expect to achieve non GAAP profitability for the second half of 2026. The main difference between our GAAP and non GAAP results is attributable to non cash stock based compensation expense. In Q4 26, we expect this compensation will be approximately $900,000 consistent with Q3 2026. As a reminder, there can be movements in our stock based compensation during any period, and it may vary quarter to quarter based on the timing of new awards, and vesting in forfeitures of outstanding awards. As I noted earlier, our positive cash flow in Q3 benefited from the timing of payments that were subsequently made in Q4.

Due to the timing of these payments, we anticipate that we will be cash flow breakeven for Q4. Inclusive of this projection, we expect to be cash flow positive for full year 2026 and close the year with a net cash balance of approximately $14.2 million. Our cash use will vary quarter to quarter based on the timing of certain payments, and collection of receivables. During Q4 26, the timing of the expected next tranche in our U. S. Government contract and payments made for wafer tape outs could impact our cash flow. Thank you for your time. And with that, I will now turn the call back to Brian for his closing comments. Brian?

Brian C. Faith: Thank you, Jim. The entire QuickLogic team is proud of the strong top line growth we are on track to deliver in 2026. What excites us most is the momentum we are building across all of our strategic initiatives, including our forecasted record revenue from IP and related services in 2026. This success is being driven by the inherent leverage of our IP business model, targeted investments, and, of course, excellent execution by the QuickLogic team. We believe this momentum puts us in a strong position to build upon our success in 2027 and beyond.

Through customer contracts and internal investments, we have leveraged the benefits of our proprietary Australis IP generator, to develop eFPGA hard IP for 9 unique fabrication processes. With customer designs that financed most of this development moving into production, we expect a growing royalty revenue stream will contribute to our anticipated 2027 revenue growth. In the IP business, success tends to build its own momentum. Prospective new customers see our design wins across a wide variety of fabrication processes and growing number of end markets, that increases their interest in evaluating eFPGA technology for new designs, their confidence in selecting our eFPGA hard IP solutions.

As it stands today, we are actively negotiating eFPGA hard IP contracts with existing and potential new customers targeting defense. Aerospace, satellite, data center, biomedical, and industrial applications. We expect several of these to begin contributing to revenue in the first half of 27. Through internal investments, we introduced our first RadPro devices and corresponding RadPro dev kit to accelerate our penetration into the lucrative markets that require Rad-Hard FPGA technology. These dev kits are being evaluated by a number of prospective customers. We believe this will lead to storefront revenue beginning in late 27. In parallel, the next tranche of our US government contract that is anticipated this quarter will fund 2 tape outs in early 27.

We believe there will be enough finished devices from these tape outs for us to support initial production quantities through our storefront initiative beginning in late 27. In addition to these storefront opportunities, we have ongoing discussions with several other customers and partners to deliver customer ASICs and a variety of chiplet designs to our storefront initiative beginning in 2027. Beyond storefront, we also expect to generate significant revenue from eFPGA hard IP contracts associated with chiplet designs in 2027. Through our close work with 2 strategic customers and internal investments, we will introduce a new GlobalFoundries 12LP eval kit in Q4. To help customers accelerate evaluations for our embedded and discrete FPGA solutions.

We believe this will yield new customer engagements and contract awards beginning in 2027. Through the investments of a strategic customer, we have developed a small package option for our existing 1-time programmable mature devices that we believe will open a new multimillion dollar market for QuickLogic with revenue contributions beginning in 2027. With the progress we have made this year, and with how well it has positioned us for continued profitable growth, I am hopeful you will share my pride in the extraordinary execution by the QuickLogic team and my high level of optimism in our future success. With this, we will now open the call for your questions. Sherry?

Operator: Thank you. Star 2, if you would like to remove your question from the queue. And for any participant using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Neil Young with Needham and Company. Please proceed.

Neil Young: Hey, Brian. And I want to give my [welcome] to Jim as well. Look forward to working with you.

James W. Sullivan: Thanks, Neil. it is great to be here.

Neil Young: Yeah. So It sounds like you flagged a lot of new contracts, which is definitely good progress. Great to hear. So of the several new contracts that you flagged, some of them sounds like there is. They could start in 4Q. So I guess I am curious, you know, how many of those new contracts actually need to close or, you know, begin producing revenue in the fourth quarter to hit the growth target that you guys laid out for the full year versus how many of those just represent pure upside? And then I have a follow-up. Thanks.

Brian C. Faith: So about 5, let's say, handful of contracts, that we do need to close for the revenue to contribute to Q4. And I will remind that the way a lot of these are structured now being ratable as soon as we can get those revenue contracts signed, we can start generating revenue in the quarter. So it is not the totality or the aggregate of the full contract values. it is just the ratable portion that we have recognized in Q4. Did I answer your question?

Neil Young: Yeah. Yeah. Yeah. And then the other question I had, so you discussed that had gone with a competitor and is now coming back to QuickLogic. But that was pretty good and interesting. So curious what drove that reversal. And do you see other similar sort of win back opportunities in your pipeline? Thank you.

Brian C. Faith: Yeah. that is a good question. So for everybody's benefit, the competitor on the eFPGA IP that was acquired or the assets were acquired a couple years ago was FlexLogix. And, was the primary competitor for hard IP for eFPGA hard IP. And we already I would say, recaptured 1 of those designs last year. From them, and this would represent the second 1. And the reason why I think they are coming to us is once that once those assets were acquired by analog devices, it was effectively a captive technology at that point, and our understanding is there were no sort of long term support agreements put in place for that technology.

And I guess for everybody else as well, FPGA technology is put into ASICs or SoC because you want to be able to reprogram that capability into that chip for the foreseeable future, in some cases, decades. And so that means you are going to wanna have a company that stands by the technology with the software and the support for those decades. And if you have a big company that is buying the assets and making a captive technology, you are not going to get that long term commitment of support. And I think that this customer probably saw that.

This is 1 of those application examples where they are intending to have this be something that is supported long into the future. And so it is really good, opportunity when they are already spinning the ASIC or doing a new chip to introduce a new supplier of that technology. And like I said, I think as far as eFPGA hard IP goes, it was really FlexLogix and QuickLogix. That are the predominant ones supplying that. So I think it was a natural evolution for them to come back and look at QuickLogic.

Neil Young: Great. Thank you.

Brian C. Faith: Thanks, Neil.

Operator: Our next question is from Tyler Burmeister with Lake Street Capital Markets. Please proceed.

Tyler Burmeister: Hey, guys. Thanks for letting me ask a few questions here. Maybe to start, you know, great to hear the next tranche of the US government contracts on track here to close in Q4 by the end of the year. I am wondering if you could just discuss what steps need to be completed in order to get that signed. And I guess I just really want to understand if, you know, guess, gauge the confidence that will get done by the end of the year, if there is anything completely out of your control or if it is, you know, pretty well understood. What needs to be done?

Brian C. Faith: I will answer with what I am comfortable answering. So if we look back for the entire 4-plus years that we have been operating on this contract, we have always said we do not know when the next tranche is literally coming in until it comes in. So it is a somewhat of an opaque process. I would also say, though, that I think if you look back over those last 4 years, generally speaking, government's been very good about making sure that things are contracted on time so that we can continue this momentum on the development side. And that is what we are building into the forecast.

And, obviously, the prepared remarks is I think our continued demonstration on the technical side, the continued need in the market for this type of technology is what we need to do and what the market needs to do for the government to continue funding. So we are comfortable to share that assumption with you, the investment community. And that is probably the extent of what I can say that I see as far as, when the timing of when that happens. I do not wanna go further because we are not really supposed to talk about those types of discussions.

Tyler Burmeister: that is great. that is great. I appreciate that color. Maybe on the-- a similar thought on the contract. You know, would you be able to discuss, you know, just the size of that next tranche, you know, maybe in comparison to the $13 million you got this year? And then, you know, is that probably gonna be for the tape out exclusively? Is that also including the store for revenue that you referenced? You expect to get by the end of the year, or would that be you know, separate in addition to the to the to the investment trust.

Brian C. Faith: Several questions embedded in that. What I. I will not say what we think the total tranche is because that is a detail I am not comfortable sharing publicly. The second thing I will say is that our forecast was that this clearly funds among other things, the tape out expenses, which is what I and Jim both said in the prepared remarks. And then the last thing I will say is that this whole contract that we are doing with the government is a development contract. So it does not include storefront revenue as part of that.

This is a development contract, which is again why QuickLogic took the step to self fund some of the things with RadPro and the dev kits last year. So that we could get dev kits into the hands of the defense industrial base so that we could be planting these seeds with our software and the technology so that once the development of this overall program is done, we had you know, established relationships and, engineering evaluation with these customers so we could transition from development to storefront devices. Be clear, the development contract with the government is a development contract.

This does not include you know, devices that we would be selling at the end of that. that is a transition plan.

Tyler Burmeister: Perfect. Perfect. I appreciate that. that is all from you guys.

Brian C. Faith: Thanks. Thanks, Tyler.

Operator: Our next question is from Gus Richard with Northland Capital Markets. Please proceed.

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Gus Richard: Yes. Thanks for taking my question. Congratulations on the progress. I was hoping you could give us a little bit of color on how much was the RadHard contract revenue in the quarter? and how much was eFPGA contract and demo boards in Q3?

Brian C. Faith: Correct.

James W. Sullivan: I guess this will be parsed out in the queue that is filed, but I think the RadHard contract, you can figure it out based on the customer a. I think that is about 3-point something. $3. 4 to 3.5 million. Thanks, Jim.

Brian C. Faith: $3.4 million to $3.5 million. And then mature devices is 1.1. And then the balance would be the EFPGA.

James W. Sullivan: There might have been a 100 k of new product device.

Gus Richard: Right. Okay. So about $350,000 of new FPGAs. So can we think about that? Because it is a ratable contract on the eFPGAs, you know, what should we think about the run rate of that in the fourth quarter and then going into next year?

Brian C. Faith: Well, I think 1 of the benefits of having more ratable contracts is that it starts to dampen the peaks and valleys of the IP revenue. I mean, that is 1 of the benefits of doing that. I think in terms of Q4 well, I guess, you know, the government contract to some extent is routable. Also. Right? So if we take that out, we are-- no. Actually, I am not gonna take it out because that starts to dissect too much detail, I think, on the components of the revenue. I think you know, definitely, north of $6 million would be ratable type contracts. For Q4. Oh, over how many years? Oh, over how many years? That will change.

That will start to change with the government-- the government revenue in 2027. But I think what we are trying to do is make sure that you know, in any quarter, there is gonna be at least a couple million of ratable IP revenue. As we start layering in more of these IP wins, I think it should get to that point where consistently in that range, which is good because it is I mean, that is just in the near term next year. Obviously, we want that to be growing continually through the year. I think that is the point at which it becomes a pretty profitable business for us.

Gus Richard: Got it. I jump back in the queue or keep asking questions, whatever you prefer. At least 1 more. Thank you. When you think about your opportunities versus process nodes, you know, you are working with FDX and 12LP and GlobalFoundries, you are working 18A and 18A-P. Which ones of those do you see as you know, your chiplet revenue opportunity in the next year?

Brian C. Faith: Do not answer that. Giving some context. So if we look back over the last few years, there is been a lot of investment by the US government in an onshore supply chain. And that onshore supply chain includes GlobalFoundries, 22 FDX, 12LP, 12LP plus. In fact, it includes 18A, 18A-P. It includes some TSMC notes down in Arizona as well. And so now I think the shift is happening where it is not just the infrastructure but it is now chip designs and chiplet designs that would make use of that infrastructure. Includes wafers and advanced packaging capability.

And so that is the context for my answer where what we are seeing is a lot of interest in chiplet designs for these onshore nodes. And the. I would say the top 3 that we are seeing are 22 FDX and 12LP at Global, and either 18A or 18A-P at Intel. Again, because it is starting to reuse a lot of this CapEx that went into building the capability onshore for these process nodes. There are other ones you know, offshore that would be primarily TSMC based. But I think those tend to be more customer funded completely versus, you know, augmented by the US government.

So because there is a preference for us to be closing things sooner, and seeing some of that subsidy coming in to offset some of the costs that would be US based.

Gus Richard: Okay. Got it. Thank you so much. [Inaudible]

Brian C. Faith: Yeah. Thanks, Gus.

Operator: Our next question is from Richard Shannon with Craig Hallum Capital Group. Please proceed.

Richard Shannon: Great. Thanks, Brian and Jim, and welcome, Jim. Look forward to working with you as well. Let me ask the first question here on storefront. Brian, in your second round of prepared remarks, you. Well, I say, think in the first part as well, you listed out a number of dynamics that I think you said would contribute to 2027 storefront revenues. I think last quarter, you gave us some sense of scale here. I think you said low 7 figures. Wanted to see, first of all, if that is still a kind of a general range that you think or it could be higher.

And then maybe if you could maybe force rank those contributors to that storefront revenues next year.

Brian C. Faith: So some of the storefront revenue would be in the development of these devices. The second phase is the actual sales of those devices. If we are talking about ones that follow on as to what Gus was asking, you know, with these onshore nodes, you know, we are looking at low 7 figure development for these chiplets. And then to the extent we can turn the design, tape them out, cycle time through your fab, and start to sell devices next year, like, in the second half? Just selling these types of test strips would probably be in the low 7 figure range.

Just based on, you know, the quantity of units and the ASP of those units in that time frame. Did that answer your question, or do I need to go further?

Richard Shannon: So just to be clear, I mean, you are expecting chiplets to be the dominant driver of storefront revenues? Because I thought you mentioned a few different contributors to that.

Brian C. Faith: No. there is a few across those different nodes. Some of them could be chiplet. there is I would say, a couple that are not chiplet that would actually be discrete stand alone FPGAs.

Richard Shannon: Okay. I mean, we will [chew] on that while I ask a couple other follow on questions here. it is been a rarity. I have been covering you guys for, I am not sure how long, many years here. And I have rarely asked a question on your conference calls about your mature products here. But you seem to be fairly excited about the opportunities at least to extend the revenue stream for a period of time, if not grow it here. So with these kind of, you know, new packages and other things here. So maybe, Brian, can you give us an outlook for what you think mature products can do next year after?

I mean, do you think they can sustain a particular level like the level you are seeing this year for couple of few years, or am I over reading what you are discussing?

Brian C. Faith: No. I think with these new packages that we are talking about, it helps to expand the market from what we are selling to today. And by expand, I really mean newer designs, newer sockets that are becoming available. In this particular sector of aerospace and defense. So, I mean, we have internal models that show the mature product getting up to you know, $10 million a year. Through some of these new wins because some of them are higher volume than what we have seen historically. And with this new package, I think we have a way of getting into those that we did not have previously.

Richard Shannon: Okay. Very interesting. By the way, I will I will just I will definitely follow-up.

Brian C. Faith: Just to emphasize. 1 more thing, Richard, on that. This is not us concocting like a market or a problem for a market because we did have a customer that basically helped fund this package development because they see the need, and they see the void, if you will, that exists between their desire to use FPGA technology for these applications and no FPGA being available antifuse FPGA available that is in the smallest package to do that.

Richard Shannon: Thanks for that perspective, Brian. My next question is on the RadHard contract here. You mentioned 2 tape outs for next year. Can you describe and delineate what those are for? Perhaps I missed notion of having 2 tape outs at the end of this 4.5 year contract. So perhaps I have missed out on that, but I do not. I wonder if you could just kinda describe what the 2 tape outs are for. Are these 2 tape outs at the same time with, like, different you know, logic densities or you know, are they 1 after the other? Maybe you could just delineate what that exactly means. Thanks.

Brian C. Faith: I wish I could go into that detail, but I cannot, Richard. But it is 2 device tape outs. In early 27.

Richard Shannon: Okay. Yeah. Well, I thought I would give that a try. I did not think you would, but I thought I would try. that is right. Well, let me just ask 1 last question. I will jump out of line here. Maybe describing the pipeline. I know it is been a couple of years since you tried to quantify the pipeline in dollar value and understand why you are not doing any. But I do not think we have had much of a discussion since on what the pipeline looks like. And your discussion here was today and past couple of calls of listed a number of contracts here.

So maybe kind of do the top down here on kinda numbers of potential engagements in the pipeline as well as, you know, sketching out what kind of the total value might be, you know, if they all come to fruition. that is all for me. Thank you.

Brian C. Faith: I think if I gave the number where if they all come to fruition, nobody would believe me, so I am not gonna go to that 1. But the. You know, we have. Well, let's start with top down. So what we have been talking about for a couple years now is getting to the point where you know, we are reliably in that $100 million range of revenue annually. And we are getting a bigger and bigger piece of that billion dollar available market. Some of that being driven from the market for the router FPGAs, some of it being what we could do for a tolerant FPGAs, some of it doing with IP some of these chiplets.

And I think this year, we have made a lot of progress in growing the funnel even though we have not been saying what that funnel number is. But the funnel has been growing this year really, from all of those different product categories. And I think that next year is gonna be a big marker for us to grow the revenue from this year and I think we have the funnel to do that again across these different product lines. The development contract with the government storefront opportunities, the eFPGA IP, and the mature products. So really all of them contributing to this.

In terms of number of opportunities, so the diversity within the funnel, there is I do not know. Many tens of opportunities all of which are, you know, high dollar value. That feed into that funnel value. So I think we are ending the good year on a good note with that. I think with the stuff we said that we would be closing out this quarter contractually, then just continued execution on some of these other ones that are already under contracted. It bodes well for 2027.

Richard Shannon: Okay. Great. Thank you, guys. I will jump back in the line.

Brian C. Faith: Thanks, Richard.

Operator: As a reminder, just star 1 on your telephone keypad if you would like to ask a question. Our next question is from Rick Neaton with Rivershore Investment Research. Please proceed.

Rick Neaton: Thank you. Hi, Brian. Hi, Jim. Right. I have 1 question since we are at the end of the line here. And it concerns your chiplet opportunities. How many of these are developing out of your relationship with Yochip? Versus a general move toward chiplets and overall semiconductor design in the last few years. Could you elaborate on that?

Brian C. Faith: I can elaborate a little bit. So of all the ones that we talked about on the call, I mean, there is 1 clearly that has a codevelopment with Yochip. Out of all the ones. Right? So a small percentage in terms of our total. I would say that it is an interesting opportunity with Yochip, though, because they have a technology that should actually make it easier, less risk, lower cost to do chiplet based architectures of course, you have to prove out the concept first. And I think this is really interesting for us and Yochip to be doing this first 1 because that will become the proof point that we hope will be generating more repeat business.

And, actually, this particular customer was really interested in this whole architecture They thought, in fact, that this 22 FDX chiplet may have a lot of merit even outside of this 1 particular market that this is being designed for. Because 1 of the issues with chiplets that we have talked about for the last couple years is this notion of how do you connect older technologies with newer technologies. And they seem to have a promising way of doing that. We just need to prove it out with them and then see if we can replicate that elsewhere. The short answer to your question is 1 of the opportunities that we talked about today is with Yochip.

Rick Neaton: And what is driving the other interest in chiplets?

Brian C. Faith: The other interest is I mean, at a high level, it is the same thing. it is the fact that people want to start piecing together different chips or chiplets to address an application or market specific need without putting everything into 1 piece of silicon. So you start to get reuse. Now the upfront architecture and the upfront development of each of those does not save you money because you still have to design chips from day 1. But once you have done that and you have sort of paid that tax, if you will, the reuse is what gives people, you know, the ROI that they are looking for. Again, I will go back to the earlier question.

The US has been investing a lot on chiplets because they know, especially for aerospace and defense, that you do not wanna redo a chip every time. You do not wanna go to the most advanced node every time. Especially for aerospace and defense. And so now they are moving from this build out the infrastructure to let's start proving this out in chiplets. And so there is other applications around defense and space where chiplets might make a lot more sense. So that is the other thing driving these other applications.

Now, again, if you are doing a lot of onshore development for the first time, you are probably gonna be using more advanced nodes for those first few chiplets that we talked about 22 and 12 and 18. Those are all more modern. We are not talking about going back to you know, 90-nanometer or 65 nanometer. But the technology that we are talking about with Yochip could actually go back that far. there is a demand for that.

Rick Neaton: Okay.

Brian C. Faith: Did I answer your question?

Rick Neaton: Thanks for the color. Yeah. That helps.

Brian C. Faith: Great. You are welcome. Thanks, Rick.

Operator: There are no further questions at this time. I would like to turn the floor back over to Brian for closing remarks.

Brian C. Faith: Thanks, Sherry. As always, thanks, everybody, for your continued support. We look forward to seeing many of you next week at Craig Hallum. Alpha Select Conference in New York. In December, we will also be participating in the virtual Northland Growth Conference and holding meetings through Lake Street. And in January, we will be back in New York for the Needham Conference. Thank you again, and have a great day. Bye.

Operator: Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.

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