Ladies and gentlemen, good afternoon. At this time, I would like to welcome everyone to the QuickLogic Corporation's Third Quarter 2015 Earnings Results Conference Call. During the presentation, all participants will be in a listen-only mode. A question-and-answer session will follow the Company’s formal remarks. [Operator Instructions] I will repeat these instructions after Management complete their prepare remarks. Today's conference call is being recorded. With us today from the Company are Andy Pease, the President and Chief Executive Officer, Sue Cheung, Principal Accounting Officer, and Brian Faith, Vice President of Worldwide Marketing. At this time, I would like to turn the call over to Sue Cheung, Principal Accounting Officer. Please go ahead, madam.

Thank you, Operator. Thanks to all of you for joining us today. Before we begin with our prepared remarks, I will take a moment to read our Safe Harbor statements. 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 the mature products, statements pertaining to our design activity and our ability to convert new design opportunities into production shipments, market acceptance of our customers' products, our expected results and our financial expectations for revenue, gross margins, 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 the 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 third quarter of 2015, total revenue was $4.2 million, which was below our guidance range. As we stated in the preannouncement of our Q3 result, our primary reasons for the shortfall to guidance was an unexpected and a temporary decline of mature product revenue. As a result, mature product revenue was approximately $1.3 million. Our new product revenue was $2.9 million, which reflects increased shipments of sensor processing and a display bridge solution that were offset by a larger than expected decline in smart connectivity solutions. Samsung accounted for 57% of total revenue during the third quarter as compared to 41% during the previous quarter. Due to lower mature product revenue and a notable increase in display bridge shipments to Samsung our non-GAAP gross margin for the third quarter was 30% and was below our forecast. Non-GAAP operating expenses for the third quarter totaled $5.7 million, which was in line with our forecast. On a non-GAAP basis, the total for other income expense and taxes was a charge of $59,000. This resulted in a non-GAAP loss of approximately $4.5 million or $0.08 per share We ended the quarter with a cash balance of $23.4 million. Due to the timing of our working capital needs, cash declined by $3 million which was at the low end of our forecasted cash usage. Our Q3 GAAP net loss was $5.1 million or 0.09 per share. Our GAAP results include stock-based compensation charge of $479,000, restructuring charge of $77,000 and $8,000 of a fixed asset write-off. Please see today's press release for a detailed reconciliation of our GAAP to non-GAAP results and other financial tables. In addition, you will also find a financial table published on our IR webpage that provides current and the historical non-GAAP data. With that, I will turn the call over to the Andy Pease, who will update you on the status of our strategic efforts.

Thanks, Sue. While the temporary decline in mature product revenue in Q3 was disappointing, our strategic initiatives are progressing in line with our expectations. Before we focus on the status of those initiatives, let us take a minute to baseline some of our other activities. Order flow for our mature products is usually fairly predictable. However, an unusual customer demand pattern led to a shortfall from last quarter's outlook. As Sue will note, we expect mature product revenue to rebound to approximately $1.7 million in Q4. We think that will be the new norm going forward. As discussed in our July conference call, revenue from smart connectivity products declined again in Q3. This decline was primarily driven by lower demand for PHS handsets in Japan. At the peak, we were supporting five unique PHS handset designs with our smart connectivity solutions and some of these designs used two of our devices. Due to the market's shift away from PHS, we anticipate supporting only one PHS handset design during Q4. While the decline in PHS demand negatively impacted new product revenue during the last two quarters, we continue to win new designs and believe smart connectivity revenue will begin to rebound modestly in Q4. Our recent smart connectivity design wins include Thinkware and Sharp. These are new customers for QuickLogic and we hope to win new designs with them in the near future. Thinkware is a rapidly growing South Korean company that is a world leader in dash cam video recorders. Thinkware is using our PolarPro II solution for smart connectivity applications in two new products, a dash cam and an automotive navigation device. Dash cam videos of events like meteor showers, earthquakes, floods and plane crashes are common on YouTube and are often used worldwide by news reporters. Dash cams…

Thank you, Andy. Our guidance for Q4 2015 is for total revenue of $4 million plus or minus 10%. The total revenue is expected to comprise of approximately $2.3 million of new product revenue and $1.7 million of mature product revenue. While we expect the revenue from our sensor processing solutions in the smarter connectivity application to increase sequentially in Q4, this is increases are not expected to fully offset the reduced shipment of a displaced purchase solution. As in prior quarters, our actual result may vary significantly due to schedule variations of some of our customers, which are beyond our control. Schedule changes and the projected production strong [ph] base to push or hold old shipments between Q4 2015 and Q1 2016 and impact our actual results significantly. On a non-GAAP basis, we expect our gross margin to be approximately 42% plus or minus 3%. The anticipated increase in gross margin reflects the impact of product and customer mix. We are currently forecasting non-GAAP operating expenses to be $60 million plus or minus $300,000. Expected increase in OpEx is primarily driven by engineering expenses associated with the release of the EOS S3 platform and ongoing development of our EOS hardware and software solution. Non-GAAP R&D expenses are forecasted to be approximately $3.7 million and our non-GAAP SG&A expenses are forecasted to be flat at approximately $2.3 million. Our other income expense and taxes will be a charge of up to $60,000. At the mid-point expected of our guidance, our non-GAAP loss is expected to be approximately $4.3 million or $0.8 million per share. Our stock-based compensation expense during the fourth quarter is expected to be approximately $660,000. This increase is due to the timing of our annual employee stock grants. During Q4, we expected to accrue approximately $70,000 in restructuring charges as was the case last quarter our non-GAAP results will not reflect these charges or charges associated with stock-based compensation and fixed asset write-offs. Including the favorable impact of an additional $1 million loan from our bank line of credit, we expected to use approximately $3.8 million to $4.3 million in cash. This would result in quarter ending cash balance in the range of $19.1 million to $19.6 million. The increase in cash usage in Q4 is primarily driven by the lower revenue level from the prior quarter and planned increases in our inventory level and other anticipated increases in working capital. With that, let me now turn the call back over Andy for his closing remarks.

Thanks, Sue. I am pleased to announce that Mark Sprague has joined the QuickLogic family as our new Vice President of Worldwide Sales. Mark is an experienced sales leader with more than 23 years of semiconductor and system-level experience. He has a strong track record of consistently exceeding revenue targets along with his excellent business development, account management and solution selling skills. Immediately prior to joining QuickLogic, Mark was Director of Worldwide Sales at Trimble Navigation. Mark has held a variety of sales management positions at a number of companies, including our RFMD, IDT, Zilog, AMD and Marvell. Mark started last week and is in the process assuming responsibility for our entire sales process. This is key as it will enable Brian Faith to focus his efforts on product marketing, business development and investor relations. Our sensor processing solutions have generated considerable interests that have enabled us to shift the focus of our go-to-market strategy from larger brand-name OEMs and narrow our focus at ODMs and IDH companies. This is a significant development in our evolution, which will enable us to scale our business by engaging in opportunities that have much higher revenue and ROI potential. As you can see from the steady increase in our R&D activities, we have made substantial investments in our sensor processing solutions. These solutions include sophisticated programmable SOC platforms, a wide variety of sensor software algorithms and a comprehensive reference design for our targeted markets. We expect these investments to establish QuickLogic as a premier supplier for sensor processing solutions in 2016. With that, I will turn the call back over to the operator and opened the floor for your questions.

Thank you. [Operator Instructions] Our first question comes from the line of Krishna Shankar of Roth Capital. Your line is now open.

Yes, Andy. Congratulations on the design win momentum. You mentioned, I guess, nine OEM customer engagements, where you have I guess design activity or joint platform development. Can you give us some sense for how those nine OEMs split between top-tier smartphones versus wearable companies and which of those have you announced already including this Runtastic Adidas thing? Can you sort of give us a little more color on that?

Well, of the nine, I think that Runtastic is the only one we have announced and we have not announced any of the eight others; in terms of a split between smartphone and wearable, most of them are in the wearable market, but there are a couple of smartphones in there as well.

These include both S2 and EOS 3 or can you give us some sense for are you getting more design wins now with the EOS S3 or it includes S2 and S3?

We are definitely starting to engage customers with our S3 platform now that we’ve started sampling it, but there are continued activities with the S2 as well.

Okay. I guess, given the timeframe for these design wins, as I look at 2016, we should expect revenues from the sensor processing platforms to ramp more in the second half of 2016?

I think that is a fair comment. We have been maintaining for the past several calls that the EOS S3 is a platform that definitely targets the flagship smartphones market and that that will begin shipping in the second quarter of this year, so that is when production will begin, meaning that the ramp will be more towards the second half of 2016. That is correct.

Okay. Then with respect to display bridging, I guess, you are seeing a little bit of decline here in Q4. Then you said that you have got your seventh design win with Samsung, how is that going to trend through the course of 2016?

Yes. In terms of display bridges, the good news is we definitely see display bridge revenue continuing through 2016. However, we do not expect the volumes to increase. Actually, we do see a declining volume as some of these products, especially the ones that are in production run their course in production.

Okay. Got it. Thank you.

Thank you. Our next question comes from the line of Gary Mobley of Benchmark. Your line is now open.

Hi everyone. Thanks for taking the question. Andy, correct me if I am wrong, but isn't the S3 better suited for smartphone use cases versus the S2? And then as well when you are engaging with potential smartphone customers, how does EOS stack up against, I guess, some competing types of configuration technologies such as ARM, big little and even advances in packaging 2.5-D and 3.5 D packaging technology, which I guess may reduce the interconnect between your MEMS and the apps processor and just any feedback there would be helpful.

Yes. I think I will let Brian tackle the second half of the question as I do the first half, but we have been fairly clear throughout the year that the S2 is definitely geared towards the wearable market and I will certainly admit that a year ago we were hopeful that the S2, because of its always on context aware nature could fit in the smartphone and that did not turn out to be the case and I think we are pretty open with the community earlier this year that the S2 would really go into the wearable market. The S3 however is absolutely designed and frankly has always been targeted at the flagship smartphone market and that is because it has the computation capability of being a standalone sensor hub next to an AP, but it also is actually a very good host in the wearable market and it will complement the S2 very nicely in the market. In terms of competitive nature, I will let Brian tackle that.

Yes. Gary, so I think in the smartphone space as far as discrete sensor hubs go, we see mostly M4-based solutions today, flash based microcontrollers, and I hope from the last presentation we did on the earnings call you can see that there was dramatic power savings by using EOS S3 as compared to those just from a microwatts per megahertz point of view. Further to that, we made some special enhancements of the EOS S3 to do always-listening voice applications at much lower power. We did that through integration of certain features like the Low Power Sound Detector from Sensory that we feel are fairly well differentiated against any of the other typical MCUs used in smartphones. Getting to your other question about stacking technology or different types of packaging, we see that from a PCB space point of view, those are relevant for wearables more so than smartphones, but wearables are also where you have the biggest issue with power, which goes back to the advantage I was talking about earlier compared to those microcontroller-based solutions. We feel if you really care about power, especially in the wearables, then EOS S3 is very well suited for that.

Okay. Thanks for that detail. And trying to you establish a new baseline for new product revenue I think your guidance for Q4 was $2.3 million and it sounds like you have a moving target for the display bridge business as you are expecting some volume declines as 2016 unfolds. I am just trying to get a sense of the magnitude of sort of headwinds that display bridge volume decline may present in 2016 off of the Q4 base and then as well how that may be offset or more than offset by a ramp in some of the sensor processors?

I will take that question, Gary. Definitely the display bridge does have some headwinds. You can tell it from the current quarter guidance. I think that we are seeing quite a bit of activity in the sensor processing as Andy outlined. We are hopeful that that will overcome some of those headwinds in the display side, but we only forecast or give guidance a quarter out and I think our OEMs have just as much difficulty forecasting beyond that window, so I think we have to leave it at that for this call.

Okay. Last question from me, the $70,000 restructuring charge in Q3 and the one you are expecting in Q4, what does that relate to? Is that a personnel reduction? If so in what specific area, if any sort of target at all, and what sort of headcount are we talking about at the end of the Q3 versus the prior quarter?

Yes. Gary, this is Sue. The $70,000 accrual related to Canada employee, we have two employee left there, we have a period of six months for them to work until year-end, so we accrue that throughout the six months.

Yes. To give you some color on the total restructuring charge, Gary we announced mid-year that we are doing a restructuring of about nine people other than Canada, which frankly those people will be replaced in Sunnyvale, so we are consolidating our engineering activities to be centric to Sunnyvale and Bangalore, India, but the other people that were involved in the restructuring were really in operations and finance, so we have pretty much left engineering untouched as we really are trying to ramp up our engineering as I think you can definitely see we are definitely becoming more of an IP company than we have in the past.

Okay. All right, thanks for the responses guys.

Thank you. [Operator Instructions] Our next question comes from the line of Rick Neaton of Rivershore Investment Research. Your line is now open.

Hi, folks. Andy, are you still targeting the fourth quarter of next year as your initial timeframe at which the company could breakeven?

Yes. Rick, we are targeting to hit a breakeven by the end of next year. That is what our plan is to do. That is as we see it today.

Okay. Is the breakeven point still the same as it was that the last call, $11 million to $12 million in revenue with 50% gross margin?

Yes. There is so no change in those numbers. That is right, Rick. That is how we still think.

Okay. In last quarter, at the last call you also mentioned that you thought the middle of this particular calendar year was going to be the bottom. Given the uncertainty in display bridge revenue in 2016, should we look at this bottoming process as more ending in Q1 of next year?

Rick, it is hard to have a crystal ball to go into Q1, but obviously this quarter is a little bit less than last quarter. That was at the time that we did last call, something that we did not anticipate. We did not anticipate the decline that we see in display bridges at least in the forecast. That could change as we near the holiday season, so clearly we have a bridge to gap to get to the EOS S3 production volume. That is clear and I think we have always been telling people that that is the bridge that we have to clear since the S2 was only targeted towards wearables. Right now, the wearable business has remained small. I will say though that the thing, and if you noted in our prepared remarks, we did say that we are seeing a big shift in the type of customers that we are attracting, so instead of a lot of ODMs and IDHs that can actually amount to high numbers, we are actually seeing names that are absolutely recognizable, so that will mean more volume per engagement and I think that is very good news and that applies for the S2 as well as the S3.

In looking at your SenseMe algorithms, do you see application for them and other internet of things markets like the automotive autonomous driving, industrial, similar to the way you have your display bridge now and a dash cams?

This is Brian. I will take that question. We do see the applicability of some of our algorithms and other segments that to our more IoT related, especially as it comes to the multi-axis senor fusion, the motion fusion aspects of SenseMe library, not so much the step counters and things like that, because those are very consumer wearable-centric, but the under-the-hood motion fusion definitely it can be applied to other industries and other markets.

Okay. Typically you were talking about the EOS being targeted for production in the second quarter and really being a second half of 2016 phenomenon, typically with smartphone OEMs, what is the lead time that they order products and design slots for new models of their smartphone?

Let us step back and talk about design cycle and then ordering cycles. From a design cycle point of view, I have met with customers that will turn out a smartphone in six months from the point of engagement all the way up to 18 months really depending on the type of customer and where your inserted into the design flow. The sensor processing capability like with EOS S3 is something that is going to be architected in early on in the architecture, which is why it is so important that we were able to get - out on time the S3 A [ph] sampling as we did to the smartphone customers we are talking about. When it comes to purchasing devices, this also varies by OEM. They can give you four weeks of lead time or some of them can give you a couple of months of lead time when it comes to forecasting and then purchase orders for units and again that is varies very much by OEM.

Okay. Thanks, guys. I appreciate it.

Thank you, Rick.

Thank you. At this time, I would like to turn the conference over to Andy Pease for closing remarks.

Before we conclude this call, as with great sadness that I shared with you the passing thing of Evelyn [ph] West, a long time spouse, companion and soul mate of Bob West. I met Bob about seven years ago and one of the great aspects of being in this business is you get to meet some really extraordinary people. Bob is certainly one of those people. Over the years Bob has become more than just the business associate to me and I am honored to call him my friend. Please join me in letting Bob know that he and his family are in our thoughts and prayers. We will be participating in a number of industry events during the next three months. Dr. Timothy Saxe will be presenting at the wearable sensors and electronics show at Santa Clara, November '16 and '17. Sue and I will be at the ROTH Technology Corporate Access Day in New York on November '18. Sue and Brian will be at the Benchmark Michael Cap Discovery Conference in Chicago on December 10. We have our largest private suite ever at CES in Las Vegas on January 6th through to 9th on 2016. Both, Brian and I, along with several of our other key executives will be there and we would love to see you there. Finally, Sue, Brian and I will be at the Needham Conference in New York on January 12th through the 14th. Details will be included in our upcoming media events. I want to thank you all for your continued support and I look forward to reporting our strategic progress on our next earnings call, which is scheduled for Wednesday, February 10, 2016.