Good day, ladies and gentlemen, and welcome to your Fourth Quarter and Fiscal Year 2011 Earnings Conference Call. [Operator Instructions] And as a reminder, today's conference is being recorded. And now I would like to introduce your host for today, Ralph Marimon, Chief Financial Officer.

Thank you, and good afternoon. Before we get started, let me take a moment to read our Safe Harbor statement. During this call, we will make statements that are forward-looking. These forward-looking statements involve risks and uncertainties, including but not limited to, stated expectations relating to revenue from our new and mature products, statements pertaining to our design activity and our ability to convert new design opportunities into customer activity, market acceptance of our customers' products, our expected results and our financial expectations for revenue, gross margin, operating expenses, profitability and cash. QuickLogic's future results could differ materially from the results described in these forward-looking statements. We refer you to the risk factors listed in our annual report on Form 10-K, quarterly reports on Form 10-Q and prior press releases for a description of these and other risk factors. QuickLogic assumes no obligation to update any such forward-looking statements. This conference call is open to all and is being webcast live. For the fourth quarter of 2011, total revenue was $4.3 million, which was just below the low end of our guidance of $4.5 million. New product revenue totaled $1.7 million, which was up 39% from the Q3 level and above the high end of our guidance. New product revenue was higher than forecasted due to additional shipments to Pantech and our initial shipments to Kyocera, as well as other new product customers. We believe these customers were building inventory ahead of the early Chinese New Year. Mature product revenue in the quarter totaled $2.6 million, which represents a 36% sequential decrease over Q3. Mature product revenue was negatively impacted by lower bookings from our customers in the aerospace, test and instrumentation sectors. We expect mature bookings will remain low in the near term. Our non-GAAP gross profit margin for…

Thank you for joining us this afternoon. As Ralph mentioned, our new product revenue came in above the high side of our guidance. This was primarily driven by our 2 smartphone customers, Pantech and Kyocera, who we believe were accelerating shipments of our ArcticLink II VX CSSP so they could build inventory ahead of this year's early Chinese New Year celebration. And these designs are CSSP ships between a Qualcomm Snapdragon processor output and the native RGB input used on the display. The Pantech Vega 5 smartphone utilizes our visual enhancement engine, or VEE, and Display Power Optimizer, or DPO, functions. Pantech brands our technology to their end consumer as Smart Eco and provides user access to it through the Vega 5 Android settings menu. However, the current Kyocera DIGNO smartphone shipped without having these features enabled. As previously discussed, an issue arose with the unique use case that involved our visual enhancement engine and how VEE interacted with their display. Since we also provide the required 60-frames-per-second MDDI to RGB bridging function, the use of our CSSP and our revenue was not impacted. While it is always nice to get another smartphone in the market that features the video quality and improved battery life that VEE and DPO deliver, our quick and complete response has led us to develop an even closer relationship with Kyocera at all levels. In addition to the Pantech Vega 5 and the Kyocera DIGNO, we expect the third smartphone CSSP design to move into production during the first half of 2012 that uses our ArcticLink II VX CSSP. We have ongoing engagements with Tier 1 and Tier 2 smartphone and tablet manufacturers who are very interested in our recently announced ArcticLink III VX family. These includes tablet manufacturers who provided us with their technical…

Thanks, Andy. For the first quarter of 2012, we are forecasting new product revenue will be approximately $1.5 million, plus or minus 10%. As I noted earlier, the higher revenue we saw in Q4 was driven by pull-in from our smartphone customers and other new product customers. While we initiate shipments to support production of our new pico projector design, we do not expect them to fully offset the Q4 pull-ins by our other new product customers. Due to continued softness in the aerospace, test and instrumentation sectors, we are estimating our mature product revenue will be flat with a Q4 level of approximately $2.7 million. Total revenue is forecasted to be approximately $4.2 million, plus or minus 10%. As in prior quarters, our actual results may vary significantly due to schedule variations from our customers which are beyond our control. Schedule changes, particularly those that may impact new product revenue, could push or pull shipments between Q1 and Q2 and impact our actual results significantly. On a non-GAAP basis, we expect gross margin to be approximately 50%, plus or minus 3%. The gross margin reflects lower revenue levels, which affect our manufacturing efficiency and a larger percentage of our total revenue being driven by new versus mature products. We are currently forecasting non-GAAP operating expenses to be $5.4 million, plus or minus $300,000. Non-GAAP R&D expenses are forecasted to be approximately $3 million. As I mentioned earlier, certain expenses related to the development of our 2 new product platform families previously forecasted in Q4 have shifted to Q1. We expect to see a significant decline in third-party engineering expenses after this quarter. Our Q1 non-GAAP SG&A expenses are forecasted to be approximately $2.4 million. Our other income and expense will be a charge up to $60,000. Our stock-based compensation expense during the first quarter is expected to be approximately $400,000. At the midpoint of our guidance, our non-GAAP loss is expected to be approximately $0.09 per share. We expect to use approximately between $2.8 million and $3 million in cash, primarily due to the increased loss from the lower revenue levels and higher R&D expenses. Before closing, I'd like to let our investors know that we will be presenting at the 24th Annual Roth Conference on March 12 at The Ritz Carlton in Laguna Niguel, California. Our Annual General Meeting is scheduled for Thursday, April 26, at QuickLogic's headquarters in Sunnyvale. Our first quarter 2012 earnings conference call is scheduled for Tuesday, May 1, 2012. This concludes our prepared remarks, and now we'd like to open the call for questions.

[Operator Instructions] And I'm showing a few questions in the queue. Our first is coming from Quinn Bolton from Needham & Company.

I have a few questions. It looks like the new product revenue is sort of -- is that reaching a steady state here, sort of Q4, Q1 somewhere in the $1.5 million, $1.7 million range? And I guess the question is do you think the Kyocera and the 2 smartphone wins have ramped to sort of what you would call steady state? Or do you think that once you get past Lunar New Year that there's another leg up in those wins ahead of the third smartphone that you talked about ramping in the second -- first half of the year?

Well, first, the Pantech smartphone has already been in production 6 months so we would expect that, that is towards its life. The Kyocera DIGNO phone was the initial production and we expect that production to continue through the quarter and the third smartphone will ramp in Q2, Q3.

Okay. And then, obviously, the VX 3 ramp sort of starts Q3, Q4 of the year that...

That's right. We've always said that the ArcticLink III family, the new VX family, starts in production in Q3. So that's where we really expect to see much -- many more engagements.

Okay, great. And then just sort of a question on the mature products. Obviously, you've seen it sometime [ph] in Q4, Q1. Do you see anything at this point that tells you that this is sort of a new lower level for that mature product business? Or you think it's more sort of inventory correction and once we're through inventory correction, that you might be able to get back up to sort of the $3.5 million to $4 million range for that business as was previously doing?

Well, we don't -- as you know, we don't look out very far with the mature business. We're really measured on the current level of activity and the bookings. So we don't know that it's a new trend. We do believe that there's still demand for those products. But whether it goes back up to $4 million, $4.5 million, it's not clear to us. So we're trying to be as conservative as possible with that product line.

Okay. Assuming that the mature product sort of stays at this depressed level for some period of time, it sounds like that probably increased its cash burn and pushes the margins closer to sort of 50%. Is there anything you're doing on the OpEx side or anything you can do to conserve cash to the extent that, that mature business doesn't pick back up, say, Q2, Q3 of this year?

Well, we always watch cash, so we're always doing the best we can to conserve cash as we go forward here. We have made some critical investments, but the biggest thing we're spending money on right now is getting these 2 new platforms out. So we expect, after this quarter, to see those third-party engineering expenses fall off. And that should help the cash burn considerably.

And we'll take our next question coming from Brian Coleman from Hawk Hill Asset.

Andy, the update on Apical was really helpful, but I'm hoping you'd clarify one thing. You said that the -- you've got an exclusive as the merchant provider of silicon implementing the iridix core. But then right after that you said something about being open to seeing competition or something to that effect in the market. Can you just clarify what competition you were referring to?

Sure. So first of all, Brian, the nature of our exclusive arrangement with Apical, which has been this way since the very beginning, is that we are the sole implementor of their technology in silicon where iridix is the primary or standalone function. In other words, Apical has always had the ability to talk to processor companies to get this technology embedded as another core in an integrated circuit microprocessor where they have a number of connectivity or other features that they embed. That has always been the case from day 1. And you may recall conversations that we've had with you regarding CSSPs in general. We always believe that if we're successful with the new proven system block, ultimately the name of the game in our industry is it will be integrated into the processor. That's what happens when the standard starts getting coreless and fixed and it becomes mainstream. So that has always been an option for Apical and that's what will happen. It's the nature of the competition.

Okay. So -- and during the quarter, there was a phone released by Sharp that had, I guess, Apical market's assertive display and then have the assertive display technology in that. So is that something where you're both in talking to Sharp, and Sharp figures out which is the best way to implement it? Or you're having a conversation with Apical before you even approach an OEM?

Well, first, not many people know this, but it was actually Sharp that introduced Apical to QuickLogic more than 5 years ago. So Sharp has been interested in this technology even before we were engaged with Apical. They certainly had the option of either using our CSSP or as you probably well know, Sharp has their own very large merchant market we're actually internal semiconductor ARM. So it was really a matter of whether they would use an external device or they would let their own semiconductor division integrate this into a [indiscernible] processor, which is obviously what they did.

Okay. Is there any update on the status of the Kyocera phone and whether it's going to ship with -- eventually ship with VEE? Or are we still at the same status there?

Yes. You know this market very well, Brian, and you know that once a phone manufacturer releases one of these phones, it's in the market already a very limited amount of time. They don't want to spin it. So once we miss the deadline, the phone continues to ship. But again, to emphasize to everybody else on this call, that did not impact our revenue at all. And as I think we said in the last conference call, Kyocera remains very interested in this technology.

Okay. You announced during the quarter, I guess maybe a week or 2 weeks ago, that you had signed a new distributor in France. And I'm curious as to how that dovetails into your sales and marketing given that you've talked about a fairly significant involvement in the OEMs during the design cycle and the implementation of CSSPs and the design all the way through, and I'm curious as to how a distributor kind of fits into that, that type of sales model.

Yes, that's a very good question, Brian. In many geographies, by the way, we do use third-party channels which help for introductions. For instance, we use a third party in Japan and Korea and even in China. Certainly, signing on a rep is indicative that we believe that there's opportunity for us in France and to have that initial introduction or the people that can maintain the day-to-day relationship is very helpful. But we still get very, very involved in the CSSP customer engagement unlike a FPGA design. So we do get very involved. And this is indicative that we think that there's good opportunity for us in France.

And is that -- I don't recall seeing anything in the press release, but was that for VX and CX or just one or the other?

We have not specified and we think it's a good CSSP opportunity.

And our next question is coming from Hamed Khorsand from BWS Financial.

I'm just trying to get an understanding here as to -- is there a set timeline you guys expect as far as a broader market adoption goes? Because it seems as though as soon as you have one handset announced, it's end of cycle and we, as shareholders, are sitting and waiting for the next one. There's some sort of revenue line.

Sure. Let me -- can I -- I'd like to take that in 2 parts, if I could, Hamed. So let's talk about VEE first of all. Sure, with the VEE ArcticLink II VX, you may recall that what we offered was VEE that could do an RGB to RGB relationship or an MDDI to RGB relationship. And when Qualcomm announced that they would be joining the MIPI alliance, unfortunately, the opportunity for us in ArcticLink II came fairly limited. That's why you only see 1 or 2 designs. We've had a few, but not nearly as many as we expected. We still expect ArcticLink II, what is in production now, to have a very good life in the standalone pico projectors where the processors spitting out RGB data and the right engine is expecting RGB data. We really expect an inflection point with ArcticLink III VX because there we take into account all the various processor outputs and all of the various display inputs that we see in tablets and smartphones giving us a lot more opportunity. The issue that we have with ArcticLink II was, while people like the VEE/DPO technology, typically it would require not only our chip for VEE/DPO, but usually an additional bridge chip. And frankly, trying to get 2 chips to implement one technology, as you well know, is a nonstarter. So we're -- that's why we are very excited about ArcticLink III VX and certainly if you haven't seen it, I would personally walk you through that introduction foil set [ph]. It's very exciting in what we've done in a number of different -- variants of devices that we have. Our VEE CX side, or the smart connectivity, the first CSSP we ever introduced was ArcticLink I, which was back in 2007. The next -- and that was our first connectivity CSSP. Now we're introducing in 2012 what we think is a very, very exciting follow-on to that in ArcticLink II CX which has the risk microcontroller, USB hub and all the other things I mentioned. And we see a lot of applications for that, not only in smart connectivity, but as we alluded to in the security authentication market space. So we believe that these 2 new platform set, you can tell I'm pretty excited about them, really get us into a lot more designs that we weren't able to address before.

Okay. So I guess going forward with this ArcticLink III, we could just see more of adoption going second half of this year, is that the hope?

That's what we believe. And again, both of these new families, both the VX and the CX go into production in the second half of the year.

And we'll take our next question from Robert West [ph] from NI Research.

I wanted to ask, Andy, if you could give us a short update on the data card market part of that, as well as anything else you want to talk about.

Sure, I'd be happy to, Bob. We actually are still seeing orders for these Icera 3G broadband data cards. I got to be honest with you, I was not sure that we'd see any orders going into 2012. We were kind of thinking that this market would run its course through the end of 2011, but we see, certainly declining, but we still see forecasted business wanted [ph] through the middle of the year. We have talked in past earnings calls about a new partner that we are engaged with, in an LTE data card, and that still is ongoing and they expect to have their reference designs in front of their customers by the end of this quarter, beginning of next quarter.

Okay, very good. What about also the mobile enterprise a little bit. I know that the middle of the last year you had an inventory overhang and some issues that looked like you might be working that off and just to update in that area, if you don't mind.

Yes. Actually, with the mobile enterprise with our existing customer, part of the pull-in that Ralph alluded to, it was mostly Pantech and Kyocera, but there was also some mobile enterprise that was pulled in by our customer. Longer term, we think that CX really provides us with a huge amount of opportunity in mobile enterprise. And we think the way to address this highly fragmented market is by partnering with silicon application processor people that will put and operating our CX device on their various reference designs that will address each individual subsegment of the market, like POS, point-of-sale machines and things of that nature. So CX is definitely targeted for that market.

Okay. Third question I have is on your ArcticLink III VX platform. You're planning 9 different versions of that product and I wanted to ask if all of those versions will become available at the point you begin to sample or will they be spaced out over time, Andy.

Well, first, just to correct you slightly, it's actually 13 versions. And actually, they will be staged but the difference between the last version and the first version is probably only about a month at a time. In other words, we are going to make sure we roll out the version that addresses the near-term opportunities first and then the other ones as we roll out. But the silicon will be immediately available all at once.

Very good. Okay. And then can you give us a feel for maybe a customer that wanted to fast track a version of your ArcticLink III? Is it possible they can get into production by Q1 of '13 or before?

I think it's very possible they could get into production by -- before Q1 of '13, yes. So I'm not sure exactly what you're asking me to answer, the timeframe involved, but I think...

Yes, I'm just trying to get a feel for when we might begin to think in terms of revenue from the AL III VX.

We personally believe that we should start to see revenue from this by the end of the year.

Okay. And then on the CX platform, it's been in production and in development for quite a long time. I know you got a lot of interest there. What about the -- what do you see for -- when initial cost of revenues might accrue to QuickLogic?

Yes. I think that CX, since it's more complex, we're going through the silicon partner reference design. I think that, that would be after VX. We certainly have interest in that. But I think that VX will -- even though the parts will come into production roughly at the same time, I would expect to see VX revenue before CX revenue.

And our next and final question is coming from Krishna Shankar from Roth Capital.

Yes, can you talk about the types of design wins that you may have, whether these are Android smartphones or tablets or pico projectors? Can you talk about customers or the types of design wins, Android or other platforms? And how it might ramp in the second half of this year for both the CX and VX platform?

Yes, unfortunately, I can't touch on customers because we're under very tight NDA requirements. Probably the first new things that we'll see rollout are the smartphone that I already talked about, but of course that smartphone is with our existing ArcticLink II platform. And of course, we're going to see pico projectors in volume in the first half of this year. Again, that's our existing ArcticLink II VX platform. On the ArcticLink III family, we believe the first things that we should see are tablets. Tablets have the strongest value proposition because of the bridging function that I mentioned earlier, but we were also seeing strong interest in smartphones as well. I was going to say mostly Android right now, although we are going seeing interest with other operating systems.

Okay. And can you just explain in very layman terms the difference between the CX and the VX platform, again?

Okay, sure, I'd be happy to. So both CX and VX ArcticLink actually are CSSP platforms. VX is for visual enhancement display and visual enhancement. So the cores that we put in VX are specifically geared towards what needs to be done to enhance the display and the connectivity between the processor and the display. So for instance, the cores that are in the ArcticLink III VX include MIPI, LDDS and obviously, VEE/DPO and IVC. CX is all geared towards connectivity. So there's no VEE/DPO in the CX, but in CX you'll see the USB hub, you'll see a micro -- a risk microprocessor and other things that relate to connectivity, both secured and unsecured. So think of C for connectivity and V for visual enhancement.

And VEE is the one that's using the AppleCare IP, right?

That's exactly right, yes.

Okay, thank you. And that does conclude our Q&A session for today. I would now like to turn the conference back to your host, Andy Pease, Chief Executive Officer, for a final comment.

Great. Well, thank you very much for joining us. For all the investors out there, we really appreciate your support and your patience. And we think that, as we move along this year, as we roll out VX and CX, we'll have a lot more exciting news coming forward. We look forward to talking to you later.

And ladies and gentlemen, this does conclude your conference. You may now disconnect and have a great day.