QuickLogic Corporation (NASDAQ:QUIK) Q3 2022 Earnings Call Transcript

Richard Shannon: Okay. Perfect. That is helpful here. The question on gross margins, you’re guiding to a number of, I forgot what we have your 52 plus or minus for this quarter and add 48. I’m assuming some element of this being lower than than a lot of the quarters seen in the last year and a half or so in the 60s or even 70s is because of the addition of professional services. And then eventually we’re or I guess hopefully we’ll see some chip sales as well. How do we think about the kind of long-term gross margin as we see a mix between all these different product lines with older ones, newer ones, and IP?

Elias Nader: The goal of the company for sure, Richard has been to hit even close to 70%, 74%, the last few press — last few earning calls. But lately what we are realizing is that most of these professional services win is pushing us to that range of about close to between 50% and 60%, right? So that’s why when we guide for Q4, we are looking at 52%, mainly because of what we’re seeing in terms of the professional services. Furthermore, if you look at Q3 by itself when we look at 49%, it’s mainly because of the fact that definitely gross — I mean, sales were very low, right, when it was 49.8 so very close to 50. So I think anything closer to 60 to me is where I want to land. So I don’t see us around 40s, let’s put it this way.

Brian Faith : And just let me add on to that, in the very beginning of any of these initiatives, there is a services component that as customers start to take IP and integrate into their chips and becomes a royalty stream for us or we start selling devices as a storefront, those are definitely going to carry much higher gross margin. So I think the longer term margin model is still intact as we start turning some of these early service engagements into the royalty of the device shipments.

Richard Shannon: Okay, perfect. Maybe one or two last questions for me, Brian maybe if we could talk about the embedded FPGA funnel and pipeline here. Talked about it going up to roughly $10 million from last quarter, which is great to see. Obviously, the contract you signed in the last quarter seems to be somewhat large or fair amount larger than normal. Maybe if you can kind of talk about the median deal size that you’re seeing or expecting in the near term or over the next year, something like that. Just to give us a sense here of whether this government contract is truly a much bigger deal size where we could see stuff more like that down the road?

Brian Faith : Yes. I mean, the full scope of the government contract that we’ve talked about could be as high as 72. I don’t think there’s going to be a lot of opportunities in that range, but there are a handful. I think the normal size range for us is going to be more in like the low seven-digit range. So maybe like say, $1 million dollars plus or minus on the IP side. And then to the extent that we start doing other chip developments for people that will typically carry a price tag that’s north of $5 million depending on the process node and the nuances of that. But, yes, straight IP deals is probably going to be right around $1 million plus or minus. Of which, there are many of those types of opportunities.

Operator: Our next question is from Martin Yang with Oppenheimer and Company. Please proceed.