Ladies and gentlemen, good afternoon. At this time, I’d like to welcome everyone to QuickLogic Corporation’s First Quarter 2017 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 completes their prepared remarks. Today’s conference call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to the Company’s Investor Relations Representative, Ms. Cathy Mattison of LHA. Ms. Mattison, please go ahead.

Thank you, Vickie. Welcome everyone and thank you for joining us today for QuickLogic’s first quarter 2017 results conference call. With us today, from the Company are Brian Faith, President and Chief Executive Officer; and Sue Cheung, Chief Financial Officer. Before we begin our call, I will read a short Safe Harbor statement. Some of the comments QuickLogic makes today are forward-looking statements that involve risks and uncertainties, including, but not limited to, stated expectations relating to revenue from new and mature products, statements pertaining to QuickLogic’s future stock performance, design activity, and its ability to convert new design opportunities into production shipments, timing and market acceptance of its customers’ products, our future evaluation systems, broadening our ecosystem partners, expected results, and financial expectations for revenue, gross margin, operating expenses, profitability and cash. I’d like to remind you that these statements must be considered in conjunction with the cautionary warnings that appear in QuickLogic’s SEC filings. Investors are cautioned that all forward-looking statements in this call involve risks and uncertainty, and that future events may differ materially from the statements made. For additional information, please refer to the Company’s Securities and Exchange Commission filings, which are posted on its website or available from the Company without charge. This conference call is open to all and is being webcast live. We will start today’s call with the Company’s strategic update from QuickLogic’s CEO, Brian Faith, then Sue Cheung, CFO, will review first quarter 2017 financial results and provide financial guidance for the second quarter before Brian’s closing remarks. At this time, I would like to turn the call over to Brian Faith, President and CEO. Please go ahead sir.

Thank you, Cathy and thank you all for joining our quarterly conference call. We have made significant progress since our last conference call in strengthening our balance sheet to support our strategic growth initiatives and sensor processing solutions and eFPGA Intellectual Property Licensing. With this progress, I remain optimistic that we will realize our goal to grow revenue by at least 50% in 2017. I am also optimistic that we will be in a position next quarter to provide more color regarding design wins that we believe will drive the second half revenue growth necessary to realize these goals. Let's start with the balance sheet. On March 28, we completed an equity offering raising $17 million of gross proceeds and close the quarter with a cash balance of $26.7 million. We evaluated several alternatives including non-dilutive options and show the fastest and lowest risk option. Due to the fact, our EOS S3 sensor processing solution is a proprietary platform, large OEMs will evaluate our ability to support their anticipated production ramps with much higher scrutiny than they have when designing in our multi-source solutions like display bridges. By increasing our cash now, we have mitigated the risk of our balance sheet becoming an issue as our engagements with top-tier OEMs move forward. In addition to this several potential ArcticPro, Embedded FPGA IP customers have asked us to accelerate certain roadmap items that will better position us to support their needs and broaden our engagements with semiconductor companies and OEMs. Let’s move to our eFPGA IP licensing initiative. Last quarter, we signed an IP license agreement for our ArcticPro Embedded FPGA technology with a second top-tier foundry. We have since completed the tape-out of our test chip with this foundry and have initiated engagements with potential customers. We also released our…

Thank you, Brian. Good afternoon and thanks to everyone for joining us today. Please note that, we are reporting our non-GAAP results here. You may refer to the press release we issued today for a detailed reconciliation of our GAAP to non-GAAP results and other financial statements. We have also posted an updated financial table on our IR webpage that provides current and historical non-GAAP data. For the first quarter of 2017, total revenue was $3.2 million, reflecting the benefit of the customers pull in which was recognized earlier than expected. Our new product revenue was approximately $1.9 million and the mature product revenue was approximately $1.3 million. New product revenue contribution increased to 60% of the total revenue compared to 64% in Q4 and 51% in Q1 2016. Samsung accounted for 22% of the total revenue during the first quarter compared to 29% during the previous quarter, reflecting the seasonality of the consumer tablet market and expanding customer base of our display bridge solution. Our Q1 gross margin was 44% compared to 33% in Q4. The increase is primarily due to the portion of eFPGA IP licensing revenues recognized in Q1. And the favorable mix of customers and products were shipped during the quarter. As we continue to broaden our customer base and grow new product revenue, we expect the margins to trend higher. Operating expenses for Q1 totaled $4.6 million, which was flat sequentially and 18% lower year-over-year, reflecting the cost reduction associated with the strategic realignment that we implemented in the second half of last year. The total for other income, expense and taxes was a charge of $61,000. This resulted in a net loss of approximately $3.2 million, or $0.05 per share. The net cash usage during the first quarter was $3.9 million, as we increased…

Thank you, Sue. We expect 2017 to be a pivotal year for QuickLogic. We are already establishing ourselves as a technology leader in ultra-low power sensor processing and as one of the most credible sources for us licensing embedded FPGA technology. With our strengthened balance sheet, we are well positioned to accelerate our technology roadmap and fund the working capital necessary to support our anticipated growth. I have been with QuickLogic for over 20 years and I can say without hesitation that I have never been more optimistic in the future prospects for the company. Thank you again for joining our conference call. Operator, we can now open the call for questions.

[Operator Instructions] And our first question comes from the line of Gary Mobley with Benchmark. Your line is now open.

Hi, Sue, hi Brian. I hope all is well.

Hi Gary.

Brian, I realize it you don’t have perfect visibility into what drives second half revenue growth leading to 50% overall revenue growth for 2017. But could you – so weigh the different contributors to that growth between S3 and eFPGA and maybe some of the legacy products as well?

Sure. I can provide a little bit of color on that. So I think publicly we've said that a good model for the mature business is to keep it roughly flat from where it's been historically last couple of quarters. We also see display bridges sort of normalizing to where it's at today plus or minus they are on $1 million a quarter, given the quarter. And that’s driven from the fact that we are still shipping to Samsung as we've said publicly in addition to these new design wins that we've already talked about and continue to ship with to. The real growth here in the second half and what gives us the optimism around the 50% or greater than 50% of revenue growth for the two new product vectors with sensor processing and eFPGA. And to your point, we don't have a crystal ball, we do have the funnel with both of those combined to get this to that number, a lot of this is going to come down to the timing of the decisions of these OEMs and when they last these products as we all have been talking about for the last couple of quarters. So they all start with the funnel and we have the funnel that covers that growth and now through that execution and timing of the OEMs

Okay, those in your balance sheet you have a deferred revenue item for the first time. And it's not a large amount but I'm assuming its relating to the eFPGA and maybe some NRE is you’re collecting from your foundry partners, is that indicative of both of your lead foundry partners offering to their customers, the ability for this embedded logic and how would you sort of gauge the licensing pipeline from your vantage point for eFPGA?

Well, first of all what shows us on the deferred revenue line you're right there’s lion's share of that is the embedded eFPGA IP licensing. We haven't said if it is one foundry or both foundries that we've publicly announced that we're working with. Nor the representative of the total deal size for the license because some of that was obviously recognized in Q1 and some will be in Q2 and so on. That being said, the magnitude of that license is representative of what you would probably see moving forward with licenses to semiconductor companies. And I just want to be clear that the license to this foundry in particular is not giving them the rights to sub-license that to somebody else, we will be having our own license arrangements with semiconductor companies or with OEMs doing ASIC separately from the one you see on the deferred revenue line there. Is that answers your question?

Okay. That’s it for me. Thanks guys.

Thanks.

And our next question comes from the line of Richard Shannon with Craig-Hallum. Your line is now open.

Hi, Brian and Sue, thanks for taking my questions as well. Let me start with your discussion about your Tier 1 win that you talked about for maybe a couple of conference calls now. Just to be clear Brian, so you have not lost the sockets but wonder if you can discuss whether you think it's possible to see this is ramping up by the end of this quarter or you dismissing that notion and clearly dismissing it in guidance but does it still possible happen this quarter?

I would say, it is possible it's not other any possibility the OEM does move fast, we know that they are changing a sensor and as I put in the prepared remarks. I don’t think that’s going to be a long cycle for them to do that and change the spot on the PCB and do the associated the software. And to be very clear, no we have not lost this to anybody else. This is a design change that they are making and we are still the plan of record as the host processor with EOS S3 in this wearable device.

Okay, great. Thanks for that.

Okay.

Sorry to interrupt you Brian. Have you got any indication that the unit outlook of the product has changed over since the last conference call?

Richard, your audio is a bit choppy. Can you repeat the question, please?

Can I go to my handset here? See I'd say any indication that the unit outlook that the customer has for this over for six or 12 months or whatever the timeframe is, has that changed at all?

No, the unit outlook has not changed at all. And as I said in the prepared remarks, I’m actually optimistic about – understanding a little bit more how they are planning to bring this to market because I think there will be some good news associated with that. And I also think that contributes to them maintaining their idea about the unit forecast.

Okay, perfect. That’s good to hear. Let’s see Sue, maybe I missed this in the prepared remarks but the second quarter revenue guidance is it – have you including any expectations for licensing revenue in there or is it just completely product revenues?

Richard, yes, yes. We did include the IP license, approaching of the IP license in Q2 guidance.

Okay. Can you give us a sense of how big that might be qualitatively or compared to first quarter?

Will be more than the first quarter, so apparently if I don't tell you the number you will see that at the end of the quarter from a balance sheet that deferred revenue what will be.

Okay, fair enough. One or two last questions for me on the topic of embedded FPGA. Brian, it sounds like you are getting a lot more attraction and interest in the technology. I think you mentioned something about accelerating roadmaps, I wonder if you can give us a little bit more detail on exactly what you're being driven to by customers is driving the current technology ArcticPro faster into markets, more customers are actually asking to do a change in enhanced technology for new applications.

Yes, I’d be happy to give a little bit more detail on to that, Richard. So first of all just everybody understands when we talk about semiconductor IP generally falls into two categories. One is a RTL type IP, which is very easily portable from foundry to know with very little work, it's also a physical IP or a hard macro which is very dependent on that foundry and process combination FPGA is fall into the latter category, which means that we do have to invest for each foundry and process node that we deliver as an embedded FPGA IP. Therefore, today you've seen in our roadmap that we have already done FPGA in 65-nanometer, 40-nanometer, we've announced 22-nanometer with GLOBALFOUNDRIES. We've also announced the second foundry in addition to Global for 40-nanometer. Now getting back to your question, Richard, what’s kind of pulling us in this direction for roadmap acceleration, we do have interest now from people going into 55-nanometer technology. 55 is a new process node that we would have to develop as this hard macro picking the foundry that we want to putting in first and then going off and doing that development. So this is nowhere near the cost of doing an actual chip design like EOS S3 but our cost associated with that in terms of layout and test chips and boards to verify that. So those are the types of things we're talking about from a process point of view, which is really applicable. When you think about what 45-nanometer is used for today it's a very – I’ll call it workhorse node it's good for RF or IoT type devices ones that need embedded flash like microcontrollers and that's really well matched with what the FPGA capability we have today. Moving forward, we do see opportunity for more of a compute oriented platform. For that there will be more architecture enhancements needed not just cording to a different node. And so there is some investment we have to make ahead of the curve on that as well. But that's going to be a further architecture development for us, the more near-term one is the 55-nanometer.

Okay, great. That sounds…

Did answers your question, Richard?

Yes, that’s very helpful. I appreciate that detail, Brian. Just one last quick follow-up on that topic, you said in the past you are hoping to or expecting to get between one and three direct semiconductor licensees during this year. Are you suggesting that that number might be larger based on the engagements you had in the last couple of quarters or is that progress to see more past this year?

I'm optimistic and that should be higher than I think our plan is roughly where you said that I – the more I talk to customers and foundry partners I think that there's a legitimate chance that we can get above that.

Okay, excellent. Well, it sounds like you have a great progress here. That’s all the questions from me guys, thank you.

Thank you, Richard.

[Operator Instructions] And our next question comes from the line of Rick Neaton with Rivershore Investment. Your line is now open.

Thank you. Hi, Brian, hi Sue. I’d like to see if I can get a little bit more color on what's driving your expectation to meet your revenue growth targets in the second half of this year. What design wins are you counting on to drive meeting that 50% revenue growth from last year.

So the profile that we are modeling, Rick for that revenue growth is at least a couple smartphone design wins that do start shipping in production. We are modeling the Tier 1 smartphone doing the wearable going through production. And then a handful of the other opportunities that are part of the funnel that span wearable, which we've talked about in the prepared remarks with respect to the app companies that wearable/hearable. And then now based on the proliferation of the Alexa ecosystem I think that we are also seeing some opportunities there to do to close and contribute the other revenue growth for more of IoT type application. That’s on the sensor processing side. We are also modeling to hit that greater than 50% revenue growth, a few IP licenses to Richard's earlier question. And with those they obviously a carry good revenue and obviously a very, very high gross margin as well. So all of those are encompassed in our plans for this year to achieve a greater than 50% revenue growth.

So you are modeling at least one smartphone production win this year, is that from a top-tier OEM?

Yes and yes.

Okay.

Yes, we are modeling at least one and yes, it is a top-tier what I would call a top-tier.

Okay. How much – what weigh or how much does attaining your revenue growth number depend on the smartphone production win?

I'm not going to give a percentage of that because I think that's going to weigh too much detail for the call but a double-digit percentage for sure from a smartphone to contribute to that.

Okay.

This is where I come back to my discussion around timing as well, how many months they are going to be shipping us, they’re also materially impacts that. But definitely we need to have at least a couple of these go to production for that revenue growth.

That’s over and above the production win at the Tier 1 smartphone OEM for the wearable, is that what you’re saying?

Yes. That is what I’m saying.

Okay, thanks. Should we be modeling any significant changes in your customer concentration in the second half of this year, given that Samsung is falling off as a larger percentage of your revenue?

I think the way we’ll answer to avoid giving away too much of what’s inside our funnel. I think from a non-sensor point of view, the contribution from Samsung will get client because we are winning these other designs with the display bridge products. So the concentration will go down just like what we see trending recently as far as the design inside the sensor processing business. I’m not going to address it at this time because I think that goes too far into who exactly we're talking to and who we are planning wins from.

Okay.

And the same goes for after the embedded FPGA as well.

You…

But I wanted to make a point here about this year, we view and I said this for the last 26 months, we do want to reduce customer concentration in general. We don't want to be having one person dictate too much of our business, it's not a good position to be in and I think that the funnel that we have is going to enable us to accomplish that.

We are training that way starting this quarter, they can’t see Samsung accounted only 22% of total revenue compared to the last quarter 29% during the [indiscernible].

Was that change Sue more the addition of the license revenue or was it more due to any declines in display bridge revenue?

It is mainly due to the decline in display bridge, not a decline as we are picking up other customers other than Samsung in display bridge solution.

Okay. Brian, you talked about the win, the design win at this app company for a new wearable that you said would go into production later in 2017. What range of annual volume you do expect from this?

I would model it is several hundred thousand up to maybe $1 million plus units. Whatever these app companies do hardware it’s a little uncertain exactly how successful they will be. I think the good thing about an app company is that they don't necessarily have to make money on the products. They can subsidize them because they make money elsewhere. And so they can price it attractively to move on and get the user base going. So that's give me some optimism it could be on the high side of that number. But if you are trying to book in this, I would use the range that I just mentioned.

Okay, thanks. That’s good to know. One last question on the hearable design engagement where you are at the designing phase, the only hearable I know of is this Vinci headphone set that has like a screen on the side, it looks like a mini TV on a headphone sets, is that what you mean by hearable or is that like version 1.0, the 1970s version of what a hearable will be?

I’m not familiar with that hearable. But the one that I’m talking about is definitely not that. To me a hearable is basically obviously its something going to be on your ear not in your wrist. And so things that you would do with devices connected to ear will be listening to music, connecting to other devices you may have the Bluetooth. But increasingly now they're going to be leveraging the same user experience that the people are trying to deployed elsewhere. So there's going to be voice activation, the ear in fact is a great place to measure the heart rate it's actually more accurate to measuring your ear than on the wrist for various physiological reasons. So we see more of biometric sensors moving there. And if you're doing all that, you may look at your steps as well to get some activity measurements, so you need motion sensors. So we see this is an area where not only do that small values and small form factor but it actually plays very well to the strengths that we believe we have with our multi-core S3. So those are the kinds of wearables or hearables that we are referring to.

Okay, thanks, Brian for the color on all the subjects. Thank you.

Thank you, Rick. And I’m showing no further questions at this time. I would now like to turn the call back over to Mr. Brian Faith for closing remarks.

Thank you. Please note, we will be participating in the following events. First Sue and I will be at the Craig-Hallum Institutional Investor Conference on May 31. Please contact [indiscernible] if you like to meet us. Second our CTO and SVP of Engineering, Dr. Tim Saxe will be participating in a panel discussion at the Design Automation Conference or DAC in Austin June 18 through 22, we will also have a booth at the conference. Third Sue and I will be presenting at the Reach China Investment Conference in Beijing on June 27. And lastly, we will have a booth at the Sensors Expo and Conference in San Jose from June 22 through 23.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program. You may all disconnect. Everyone have a great day.