Good day, ladies and gentlemen, and welcome to the QuickLogic First Quarter 2012 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce the hosts for today's conference, Andy Pease, CEO; Ralph Marimon, CFO; Brian Faith, VP of Worldwide Sales and Marketing. Mr. Marimon, Please go ahead.

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 risk 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 customer 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 first quarter of 2012, total revenue was $4.1 million, which was just below the midpoint of our guidance of $4.2 million. New product revenue totaled $1.6 million, which was down slightly from the Q4 level, but was near the high point of our guidance. Mature product revenue in the quarter totaled $2.5 million, which represents a 6% sequential decrease from Q4. Mature product revenue continues to be negatively impacted by lower bookings from our customers in the aerospace, test and instrumentation sectors. Our non-GAAP gross profit margin for Q1 was 43% and was below the low end of our guidance. At the end of the quarter, we booked an inventory reserve of approximately $329,000 or 8% of revenue. The majority of this reserve was for mature products and was due to a lower bookings rate. Non-GAAP operating expenses for Q1 totaled $5.1 million. The increase in expenses over Q4 was primarily due to an increase in engineering expenses related to our new platform development program. These expenses should decline in the second quarter. On a non-GAAP basis, other income and expenses and taxes for Q1 were net positive totaling approximately $19,000. This resulted in a non-GAAP loss of $3.3 million or $0.09 per share. We ended the quarter with approximately $17.2 million in cash. Cash decreased during the quarter by $3 million, which was consistent with our guidance. Our Q1 GAAP net loss was $3.7 million or $0.10 per share. Our GAAP results included stock-based compensation charges of $384,000. Please see today's press release for a detailed reconciliation of our GAAP to non-GAAP results. Now I'll turn it over to Andy, who'll update you on the status of our strategic efforts. Following this, I'll rejoin the call to present our Q2 guidance.

Thank you for joining us this afternoon. As Ralph mentioned, new product revenue came in at the high side of our guidance range as shipments to support new projects were higher than we expected. One of the new projects was our first pico projector design. This pico projector was designed by Micron Technology and is being sold under the brand name PoP Video. It is a unique form factor that is specifically designed to connect directly to certain Apple iPhone and iPod models. With PoP Video, users can project videos or images shown on their iPhone or iPod screen onto any surface. We initiated production shipments of our ArcticLink II VX in late Q1 to support the initial build of PoP Video. And I'm very happy to announce that the first VEE-enabled pico projector can now be preordered. You can learn more about PoP Video and order one for only $99 at www.thepopvideo.com. PoP Video will also be available for sale on the Amazon website. In addition to the PoP Video pico projector, we are working on 2 additional pico projector designs; one with another OEM and the other with a partner. Both have expressed strong interest in our VEE technology. In the past, low brightness and poor image quality have limited consumer interest in pico projectors. VEE fixes these problems. Research firm, Pacific Media Associates, believes pico projector shipments will grow from only 2.8 million units in 2011 to 58 million units by 2015. Given the substantial difference VEE makes in both perceived brightness and picture quality, we believe VEE will be one of the key growth drivers for higher pico projector demand. Since all the pico projector designs we've encountered so far require a RGB-to-RGB interface, current design activity in this market has been with our ArcticLink II…

Thanks, Andy. For the second quarter of 2012, we are forecasting new product revenue will be approximately $1.7 million, plus or minus 10%. The increase in revenue is primarily due to an increased demand for our initial pico projector customer, an additional smartphone production win and increased demand in our Broadband Data Card business. Due to continued softness in the aerospace, test and instrumentation sectors, we are estimating our mature product revenue will be approximately $2.3 million. Total revenue is forecasted to be approximately $4 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 Q2 and Q3 and impact our actual results significantly. On a non-GAAP basis, we expect gross margin to be approximately 45%, plus or minus 3%. The gross margin reflects lower production levels, which affects 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 $4.9 million, plus or minus $300,000. Non-GAAP R&D expenses are forecasted to be approximately $2.5 million. The decline in engineering expenses is primarily due to a decline in third-party engineering expenses as we finished the characterization of our new solution platforms. Our Q2 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 second quarter is expected to be approximately $500,000. At the midpoint of our guidance, our non-GAAP loss is expected to be approximately $0.08 per share. During the second quarter, we expect to use approximately $2.5 million in cash. This concludes our prepared remarks. And we'd now like to open the call for questions.

[Operator Instructions] Our first question comes from Quinn Bolton from Needham & Company.

Congratulations on the new product revenue. Just wanted to sort of start there and ask a couple of questions. First, I think on the CX, you've had sort of a lead customer with that product for some time that I think was supposed to start shipping production volumes in the third quarter. Is that still sort of the timing for the CX production revenue launch? And then I've got a couple of follow-on questions.

Yes, Quinn. Actually, that lead customer is still in their product definition and approval process and frankly, I don't expect that to be our first CX revenue. Certainly, it will not occur in Q3.

Okay. But it sounds like perhaps, there are other customers that might ramp in Q3? Or do you think it's sort of more of a sort of late 2012 ramp for CX?

Yes. We believe that CX, even if it had been with its first customer would've really been more a 2013 phenomenon.

Okay. The second question just on the new product revenue of $1.7 million this quarter. It sounds like you've got the new smartphone ramp, you got the pico projector ramp and then some strength in the data card market. Can you talk a little bit about the data card market because I think that was an area that you had seen a fair amount of softness and it almost felt like you thought that business might become a smaller percentage of revenue going forward, but it sounds like it's actually, perhaps, coming back? And I'm just wondering if that's a temporary phenomenon? Or do you think that this is the start -- I think you had referenced a new silicon provider on data cards and so wondering if that's the new customer starting -- or new silicon partner starting to ramp?

Right. No. Well, first, this data card business is -- was unexpected. We did expect -- this is a holdover from our Icera business, which was very strong in 2010 and into 2011. And frankly, we thought it'd be over by now. What has happened is that the largest customer that we were shipping into has delayed and actually decided not to ship their new-generation product, and has continued to ship with our product. So the ramp now was a little unexpected, but it's certainly nice to see. And we expect that to last a quarter or 2 before they come out with a replacement new product.

And Andy, any update on the new silicon reference design for the data card market?

That's actually -- the issue there was not our silicon, so I really can't comment on that.

Okay. Is that still an opportunity just delayed? Or is that something you think made a longer...

We're not into follow-on product. So basically, this is the same products that we've been shipping for the past couple of years. And they will be coming out with a new data card probably in Q3, Q4 time frame that addresses the LTE market.

Okay, okay. And then just lastly on the pico projector market. How large or significant do you think that, that ultimately could be for you going forward? It sounds like you've got 1 win that you talked about on the prepared comments, 2 more designs underway. I'm kind of wondering how big is that pipeline? You certainly talked about some third-party market research where the number of pico projectors could get up into the tens of millions over the next few years, kind of wondered what design pipeline looks like beyond the 3 that you've mentioned?

Well, again, we don't talk about our funnel in detail, but I can tell you that we have multiple pico projector designs and I can also tell you that VEE makes a substantial difference in this pico projection market. And we frankly believe it will be an enabler. Getting this win out with a PoP Video will be a great reference design and demonstration vehicle for us.

Our next question comes from Brian Coleman from Hawk Hill Asset management.

Andy, can you clarify for me, I think you said that you had 1 reference design out with respect to VX, in 1Q and 4 more going to market in 2Q? Is that correct?

Yes. We have 1 VEE reference design out now using our new ArcticLink III VX and we have a number of others that are in queue.

What exactly are these reference designs? Who would get them and what's kind of the form factor?

Sure. So the first reference design that we came out with is actually a customer demonstration reference design. Love to show it to you. We're showing it to other customers. This is actually a board, which a customer can now virtually, any different display, and connect it to our VX device and it has standard connections to any PC. So basically, a customer can actually look at their display going through our VX technology. It has various switches to turn VEE and IBC on or off. You can vary the strength and it has a nice little LCD readout that gives you the power. So it's a very nice reference design. The second one that's of note is one that's specifically being done with our System Solution Group to where we can take and actually measure hard power numbers and the actual consumption in a customer's system. So this is used for real SSOs that we -- as we bring individual designs into production. The third one is actually what we call a little hack card. So this is actually a modular little PCB board for customers that want to do their own version of what we did, what we and Apical did with the iPad and hacked into a system. So this actually has a modular design, so that they can put their own interface block on the front end of this and then it has another VEE block, so that they can break into this.

Yes, and this is Brian Faith. Let me add a little bit of clarity on those second set of designs. On those second set of reference designs, we actually go and make sure that these boards can connect to common application processor boards, so that we can prove out the system drivers for operating systems that are common in the mobile space. So you can think of it as a 2-step process. The first board is out. We're able to demonstrate the device works on a display connected to any PC. Then second step is that we have the drivers available so that our OEMs can adopt the solution quickly into the system with software drivers.

Okay. On that -- on this topic of VX reference designs, you've got -- you have the VX for reference design, the MDDI-RGB bridge reference design that created a couple of nice wins for you. Given that you're providing -- where you're potentially providing this critical bridging function in mismatched processor and display designs, do you anticipate now that you can be more or less ubiquitous in solving that problem? Do you anticipate more reference designs with multiple application processors as you move forward?

Absolutely. Yes. So the first order of priority for us were to get the reference design that we just highlighted to you out, and then we continue to work with our partners to actually get our solution into their reference designs to make it easier for implementation for customers.

And that's a process that's ongoing right now?

That's correct. That's correct.

Okay. When do you expect to see -- I think in the last conference call, you anticipated first ArcticLink III VX revenue in 2012. Is that still a good estimate?

Yes, it is. We believe that we will see ArcticLink III VX revenue in Q4. It may start in Q3, but we would expect Q4 is when the first revenue will actually start. Preproduction, I would say Q3.

And is that going to be pico projector-related or some other designs?

No. This would be in our mobile -- the heart of our mobile platforms including smartphones, tablets and pico projectors. Keep in mind that our pico projector revenue is really comes from ArcticLink II VX. So you remember, we have numbers after the VX. It states specifically what it does. So this is ArcticLink II VX II.

Okay. So the ArcticLink III VX revenue that we would hope to see in Q4 would be tablet or tablet or handset and not necessarily pico?

Smartphones and tablets, right. Smartphones and tablets, probably in that order.

Okay. Now that you've got ArcticLink III out sampling, when's ArcticLink IV? I guess as everybody keeps pushing the curve on display resolutions and a lot of the other metrics that seem to be selling devices, I would anticipate you've got the next chip coming out with, I think you said it had some programmability that the AL III doesn't have. But I'm just curious what the kind of the silicon strategy is going forward when you intersect the market again?

Right. So we said couple of conferences ago -- conference calls ago that we are really working hard on our roadmaps and we actually have our roadmap definition now established both in smart connectivity and display visual enhancement. And so when we show non-NDA covered slides, we actually show a next-generation chip that is actually that ArcticLink IV VX that you're talking about and when we go under NDA to our customers and partners, we actually get specific into what we're talking about, what will be in that particular device. But yes, we have that on our roadmap and certainly topics of our discussion in our strategic marketing councils.

And would that take the form of another complete family of products? Or should we expect to see you incrementally rolling out new chips over time now?

Well, it would be a new family, but it'd be an ArcticLink IV family, which would be a number of different variants similar to ArcticLink III VX, is a family of silicon platforms that have a number of different variants.

Okay. And then if I could just come back to the -- to my prior question real quick, if you're comfortable with seeing or anticipating AL III VX revenue in 4Q, does that mean there's already some pretty good -- it must mean there's some good design activity already in the works?

Yes, we believe that there is good design activity, absolutely. I think I said that during the prepared comments of the call, that we're working with several OEMs who are very interested and this is not just in a single-point product.

Right, you said across platforms.

Right. And keep in mind that we've been talking to these same customers for years and really, before -- up until now, we've always been limited because of this bridging necessity that we couldn't accommodate.

Right. And then I would imagine a lot of these discussions are picking up right off of the VEE hacked tablets the people have seen? And this has all been part of a sales process that now doesn't have to happen after the chip is sampled, people have, in the sense, been waiting for it?

That's exactly right. Brian's ready to make a comment.

Yes, the hacked systems definitely helped convince them of the viability. I think the fact that we have other OEMs already publicly stating that they've brought products to market with VEE and DPO helps. OEMs still like to see the technology with their display, so we do have to go through some evaluation process with each OEM, but it's definitely accelerated now with ArcticLink III VX.

Yes. Keep in mind that we've been in close touch with all of these OEMs because what we found is they really like the CSSP concept. And they've always liked the VEE and DPO technology based on Apical's iridix engine. And so they're very anxious to see that in silicon that they can implement into their own solutions.

Our next question comes from Robert West from NI Tech Research.

Wanted a follow-up question to Brian's discussion with you of the AL IV VX. With the switch with programmable fabric in that chip, will that alter the pad size, cost and that kind of thing? Are you -- what are you anticipating there for the VX IV?

Well, we're always going to be conscious of size and what we'll always be doing is properly sizing the fabric to the amount of value, the flexibility the fabric can bring to the design. We really don't anticipate it really altering the pad count. It could, but not significantly. But that's something we'll always watch. But we -- as you know, Bob, we've been in this mobile game now for a good 5 years and we understand that there's always these trade-offs between silicon size and bringing proper value to the market. And we're all about bringing value to the market to enhance the end-user experience.

Okay. Next question, kind of a little bit in the same area. Your CX came with the AL II CX platform, which is a 180-nanometer technology as I recall, may be wrong about that. But the question I have is, will you be thinking in terms of bringing that down and the speed like you did the AL III VX? And also, the good question there, will you be adapting the program fabric for the CX as well?

Right, that's a good question. So yes, you're right, ArcticLink II CX is done in 180 nanometer. That will be the last product that we do in 180 nanometer. We've always mentioned a third R&D project that frankly, we don't talk about because right now, it won't generate revenue. But that third project is to come out with our new fabric that will operate at smaller geometries that we will marry up with both the ArcticLink III VX, as well as the ArcticLink II CX. And of course, the CX follow-on will be an ArcticLink III CX device. And it will have the new fabric and be in a smaller geometry.

Okay. So do I understand that, that would be an even a follow-on, a #4 potential follow-on downstream?

Absolutely. Absolutely.

Okay. Next question I want to ask you about is the CX application in the smartphone that you mentioned, if I heard you right. Can you tell me a little bit about what the application for that might be?

Actually, what I think I said, Bob, was it was a non-VX CSSP. So it is actually not a CX at all. It's another example of what I was alluding to that the fact that, given the CX and our smart connectivity and we've come of age, our customers have now seen value in products that we already have to market. So actually, this is really a PolarPro II device. And I can't really get into the detail of what it involves.

Okay. And then one final in the area of your smartphones. You indicated, I think, that you have a platform win, perhaps, with 1 of your customers, did I interpret that correctly? Meaning that it could be for a phone or tablet that would go into multiple geometries -- geographies?

I think what I said is that with the VX III that we're working with several OEMs and many of them on more of a platform basis. So you're right. I'm not going to call it a design win. We don't talk about that. We'll talk about it when it's a production win. But we can tell you that the conversations that we're having now are different than when we first engaged with this whole CSSP in phones. When we first did it, they were looking to put us in 1 experimental phone. Now some of these customers want to put us in a platform that will be across many different phones that will span in different operators.

Now that's really a nice step forward then.

We think it is. Yes, we're very happy about that.

I think I have one final question, Andy. There's a company out in India developing an innovative tablet named Adam. It's been the subject of a fair amount of publicity and the founder has made some very complimentary comments about VEE/DPO on his blog. What can you tell us about this engagement or prospective customer?

Yes. First, I can tell you I was surprised to see that appear on his blog because right now, we don't know about a production schedule. And I think you know me well enough by now to say that we don't like talking about designs until we can talk about making revenue out of them. We have certainly been talking to these guys. Actually, I've personally met the 2 founders. They have got a very innovative tablet called the Adam. They are going to come out with something called the Adam 2. We don't know what the production schedule is. When we do, we'll certainly update it on this call. It's a very unique design. It's what I would call a specialty tablet that has a lot of unique software in it and it also has a rotating camera and a number of other features that make it somewhat interesting. But it is a specialty tablet. It is in India market and we have no idea when it's going into production. But we're certainly grateful that the CEO wanted to blog about us.

Yes. So would this be an AL II VX application?

This is actually an ArcticLink III VX application, yes. I can tell you that at first, they looked at the ArcticLink II and now they want the ArcticLink III.

Our next question comes from Hamed Khorsand from BWS Financial.

Just a quick question here, just from summary of what I've been hearing on the call. Is it really you guys are just in more of a holding pattern until we can get this VX out later this year?

A holding pattern in what regard, Hamed? Honestly, we...

As far as just new revenue, new product design announcements more from the smartphone and the tablet side, I know you guys have made some inroads into pico, but more specifically tablets and smartphones.

Right. I think that we have been slowly, steadily adding on new product revenue and I think it's significant that we're able to guide up in Q2 as 2 of our big smartphone designs have run their course in Q1. So we are building on top of that and steadily increasing our new revenue. But clearly, the more design wins on tablets and smartphones will come from ArcticLink III production. We've always said that, yes. I'm not sure I'd call it a holding -- we don't feel like we're in a holding pattern though. We feel like we're surging ahead.

All right. And then the other question is as far as the R&D expenses going forward, should it be right around this $9.5 million level?

I think our R&D expenses, we believe that they'll come down as we go through the year. As we lower the expenses for these third-party development costs, then the expenses will come down as we go through the year.

Our next question comes from Quinn Bolton from Needham & Company.

I just wanted to sort of follow up on that last question and I think you may have just already answered it, but you talked about this sort of an unexpected data card revenue tied into kind of the older designs with Icera. And hopefully, that revenue lasts in a quarter or 2. As that revenue does ultimately go away, do you think that creates an air pocket before the new CX or particularly the 3 VX revenue ramps? Or do you see a fairly smooth transition of those new designs so that you don't kind of hit an air pocket, say, in Q3 on new product revs?

We don't see an air pocket in Q3. We see that we're going to steadily increase new product revenue even with that data card business somewhat tapering off.

Great. And then I know it's not really a focus of the business but just was wondering, any comments you can make about the mature products, given the healthy margins in that business? It sounds like near term, orders have remained fairly sluggish. Are you able to say whether you think second quarter may be the trough in that business or is it still too early to tell?

Well, we think it's too early to tell. We've always maintained that the mature business is going to decline over time. We don't have investment in it. We don't put engineering dollars into it. And we don't have a lot of visibility given the number of different customers and geographic spread. So it may be a trough. It may be the natural level that it sits after a while. We just don't know. We, obviously, like the business because of the healthy margins. But we're not planning on big increases in that business over the next few quarters.

[Operator Instructions] We show no more questions. I'll turn it back to Andy Pease for closing remarks.

Thank you. Before I close this conference call, it is with great sadness that we note the recent passing of Andy Chan, one of our co-founders. Andy was with QuickLogic for many years and was instrumental in the development of QuickLogic's original programmable fabric technology. Our deep sympathies go out to Andy's family. With that, thank you for your continued interest and support. Our Q2 2012 conference -- earnings conference call is scheduled for July 31. Look forward to talking to you all then.

Ladies and gentlemen, thanks for participating in today's program. This concludes the program. You may all disconnect.