QUIK - NASDAQ

Ladies and gentlemen, good afternoon. At this time, I’d like to welcome everyone to QuickLogic Corporation’s First Quarter Fiscal 2023 Earnings Results Conference Call. As a reminder, today’s call is being recorded for replay purposes through May 23, 2023. I would like now – like to now turn the conference over to Ms. Alison

Thank you, operator, and thanks to all of you for joining us. Our speakers today are Brian Faith, President and Chief Executive Officer, and Elias Nader, Senior Vice President and Chief Financial Officer. As a reminder, some of the comments QuickLogic makes today are forward-looking statements that involve risks and uncertainties, including but not limited to stated expectations related 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; schedule changes and production start dates that could impact the timing of shipments; the company’s future evaluation systems; broadening the number of our ecosystem partners; and expected results and financial expectations for revenue, gross margin, operating expenses, profitability, and cash. Actual results or trends may differ materially from those discussed today. For more detailed discussions of the risks, uncertainties, and assumptions that could result in those differences, please refer to the risk factors discussed in QuickLogic’s most recently filed periodic reports with the SEC. QuickLogic assumes no obligation to update any forward-looking statements or information, which speak as of the respective dates of any new information or future events. In today’s call, we will be reporting non-GAAP financial measures. You may refer to the earnings 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 web page that provides current and historical non-GAAP data. Please note, QuickLogic uses its website, the company blog, corporate Twitter account, Facebook page, and LinkedIn page as channels of distribution of information about its business. Such information may be deemed material information, and QuickLogic may use these channels to comply with its disclosure obligations under Regulation FD. A copy of the prepared remarks made on today’s call will be posted on QuickLogic’s IR web page shortly after the conclusion of today’s earnings call. I would now like to turn the call over to Brian. Go ahead, Brian.

Thank you, Alison. Good afternoon everyone and thank you all for joining our first quarter fiscal 2023 financial results conference call. I’d like to open today’s call by sharing that given our progress in the first part of this year, I’m even more bullish about 2023 today than when we spoke during our earnings call last quarter. We now expect to grow fiscal 2023 revenue by more than 30% over fiscal 2022. During Elias’ prepared remarks, you will hear us provide our highest quarterly revenue guidance in recent history, and most importantly, my confidence is high that we will achieve positive non-GAAP operating income starting in the third quarter of 2023 as well as on an annual basis. With that opening let’s get into details. Q1 was in line with our expectations provided during our fourth quarter call. We reported revenue of $4.1 million of which new product revenue was $3.1 million. Our results continue to be driven by our eFPGA IP-based products, including the rad-hard program for the U.S. government, our continued shipments of smart connectivity and display products and our SensiML AI software platform. Looking at some of the quarters highlights, the top tier semiconductor company that is integrating a private label version of a SensiML-powered solution to address its own customers’ demand across its broad microcontroller line of products is nearing their product launch. This private labeling of the SensiML toolkit provides significant revenue potential as a result of their large installed customer base and sales force. Our large Strategic Radiation Hardened FPGA contract for the U.S. government was our largest contributor to revenue in the quarter, and we remain positive on the next steps based upon continued successful performance of the base contract. The next steps are, of course, at the discretion of the U.S. government. As a reminder, this current contract is for the development of the prototype FPGA and does not include any of the possible device sales to the defense industrial based customers. We believe this market to be several hundred million in size and our intent on capturing our share of it in the coming years. On the strength of our numerous eFPGA IP-based opportunities, our sales funnel grew to over $125 million, the largest in QuickLogic’s history. Included in this number are deals for both eFPGA IP as well as bespoke or semi-custom device development that incorporates our eFPGA IP. These deals span numerous boundaries, process technologies, and end markets. One of our unique strengths continues to be that we offer a full spectrum of solutions ranging from eFPGA IP, all the way to full chip designs which incorporate that IP. As a reminder, we have multiple revenue sources within this product category. The primary ones being design services, IP licenses, royalties, and finally, device sales via our storefront. Design services is how we monetize the R&D resources to develop our IP or bespoke devices for a customer, typically recognized as we do the engineering work. IP licenses are typically one-time events recognized with the delivery of our IP to a customer. Royalties are typically a small percentage of the final device ASP recognizes our customer’s ship devices that include our IP. And finally, storefront simply means that our customer is buying a finished device from us. This could be because they lack the expertise in developing eFPGA enabled products, or it could be that they don’t have the supply chain in place to produce and test the devices for volume production. We’ve had the supply chain in place for decades and can monetize this value with our customers. More than ever before, the fact that we have been a trusted and reliable supplier of FPGA devices is one of the many reasons why we are winning opportunities to be more than just an IP provider. In November of 2022, I assured that we had taped out a new device for a customer that incorporates our eFPGA IP. Revenue from the shipment of these test chips to our end customer will be recognized during this current fiscal quarter. Due to confidentiality requirements, I am not allowed to share any further details on the specific design win other than I believe it represents tens of millions of dollars in potential device revenue starting in a couple of years. As mentioned on our previous call, one of the contributors to our pipeline growth is a new government focused eFPGA IP based contract targeting a 12-nanometer process node. This is our first contract for the 12-nanometer process node and we continue to believe there will be several more during this fiscal year. We did recognize revenue from this contract in Q1 and expect to recognize additional revenue throughout 2023. Moving to chiplets. We are seeing additional customer interest in chiplet based opportunities, and we do expect to generate some revenue this fiscal year from either design services and/or IP licensing that would fall into the chiplet category. Moving to our mobile phone business, we expect our customer’s inventory digestion to continue through at least the current quarter of this year. However, we have been told that we are being designed into new models with phones that will ship well into 2024. Finally, we are forecasting flat revenue on our display bridge and mature product segments. While both will continue to contribute to gross margin uplift, they are still being impacted by well publicized macroeconomic factors. Fortunately, our fiscal 2023 growth is forecasted to primarily come from eFPGA IP related design wins. Before turning the call to Elias, I want to reiterate our revenue outlook for Q2 and the remainder of fiscal 2023. As discussed earlier in my prepared remarks, we have made significant progress in building our eFPGA IP related and software businesses over the past two years. This groundwork has led to a diverse and growing pipeline, which supports our current expectation for revenue in Q2 to be approximately $5 million plus or minus 10%. Our current forecast shows a sequential ramp in our revenue throughout the remainder of the year making us confident we will now exceed the 30% annual revenue growth we discussed last quarter. We are also on track to report our best non-GAAP operating income in over 10 years, turning the corner to profitability starting in the third quarter of this year, and on an annual basis as well. Let me now turn the call over to Elias for a review of the financial results. Elias, please go ahead.

Thank you, Brian. Good afternoon, everyone. Our performance in Q1 was in line with our expectations with revenues of $4.1 million and a non-GAAP net loss of $0.5 million, reflecting on the full quarter of revenue contribution from our large $6.9 million contract for Strategic Radiation Hardened FPGA Technology. With anticipated future additions to this contract plus growth in other commercial areas, we continue to believe we will likely get to profitability on a non-GAAP basis in each of the final two quarters of 2023 and for the fiscal year. Let me now turn to the review of the results for the first quarter. As I said, revenue in Q1 was $4.1 million, an increase of 1.2% compared with the fourth quarter of 2022, and an increase of 0.9% compared with the first quarter of 2022. The sustained growth is mainly due to increases in eFPGA-related revenue partially offset by a decrease in new hardware product revenue. Within our Q1 revenue, sales of new products were approximately $3.1 million. This compares with $2.8 million last quarter up 7.5% and $3.5 million in the first quarter of 2022 down 11.4%. Mature product revenue was approximately $1.1 million compared to $1.2 million last quarter and $0.6 million in Q1 last year. Non-GAAP gross margin in Q1 was 59.7%, compared with 53.2% in the fourth quarter of 2022 and 61.5% in the first quarter of 2022. The improvement in gross margins from the fourth quarter benefited from a change in the mix of deliveries – of deliverables within eFPGA-related revenue. Non-GAAP operating expenses in Q1 2023 were approximately $2.9 million. The OpEx for Q1 was lower than our forecast due to reclassifications of certain R&D expenses to cost of goods. This compares to operating expenses of $2.4 million last quarter and $3.1 million in the first quarter a year ago. Non-GAAP net loss was $0.5 million, or a loss of $0.04 per share, based on 13.2 million shares. This compares to a net loss of $0.5 million or $0.04 per share, last quarter, and a net loss of $0.8 million, or $0.06 per share, in the first quarter of fiscal 2022. Total cash at the end of Q1 was $20.9 million, compared with $19.2 million at year end. The continued investment to support the new design wins we have discussed was offset by the approximately $2.3 million raised in March at near-market rates from existing shareholders. Additionally, timing considerations related to cash receipts from customers contributed to a net higher utilization of cash from operations. In Q1 2023, we had three customers that each accounted for 10% or more of our revenue. Now moving to our guidance for the second quarter of fiscal 2023, which will end on July 2, 2023. As Brian discussed, revenue guidance for Q2 is approximately $5 million, plus or minus 10%, due to the reasons he outlined. Revenue is expected to be comprised of approximately $4 million of new products and $1 million of mature products. Based on this revenue mix, non-GAAP gross margin for the quarter will be approximately 55%, plus, or minus 5 percentage points. We will continue to see margin variances each quarter due to product mix and volatility in cost of goods sold. Our non-GAAP operating expenses will be approximately $3 million, plus or minus 10%. On a quarterly basis, during 2023, we believe OpEx will remain below the $3 million range with occasional increases to support new programs. After interest expense, other income and taxes, we currently forecast that our non-GAAP net loss will be approximately $0.3 million to $0.6 million, or a net loss of $0.02 to $0.06 per share, based on roughly 13.4 million shares outstanding. The difference between our GAAP and non-GAAP results is related to non-cash, stock-based compensation expenses. In Q2, we expect this compensation will be approximately $0.7 million. As a reminder, there will be movement in our stock-based compensation during the year and it may vary each quarter based on the timing of grants to employees. Moving to the balance sheet. Even with continued investment to support the new design wins that we have discussed, at the midpoint, we expect cash usage to continue to be below $1 million per quarter. As we stated earlier, with the new, large design wins and overall momentum in our business, and a lean operating structure, we should see continued sequential improvement in revenue in the back half of the year leading to positive non-GAAP operating income. Thank you everyone for joining us. With that, let me now turn the call back over to Brian for his closing remarks.

Thank you, Elias. This is a very exciting time at QuickLogic. We are on the cusp of profitability. The business has been transformed, driven by our eFPGA IP-based products, including the Rad Hard program for the U.S. Government, our continued shipments of smart connectivity and display products, and our SensiML AI Software Platform. QuickLogic FPGA technology is steadily extending its reach to new customers, markets, and applications. Our growing pipeline is supporting our strong conviction that we will see acceleration in our revenues starting this quarter, and sequentially in each of the remaining quarters this year, leading to non-GAAP operating income profitability for all of 2023. I would like to again thank all our key stakeholders, including investors, customers, suppliers and most of all the QuickLogic and SensiML teams for their continued support. That completes our prepared remarks. Operator, I would now like to open the call for questions.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question comes from Richard Shannon with Craig-Hallum. Please proceed with your question.

Great. Thanks, Brian, Elias for taking my questions and congratulations a good start to the year here. Maybe I’ll start with a top down question on your sales growth guidance of at least 30%, you sound increasingly confident of that. Want to get a sense here of some of the new contributions or areas where there’s more certainty. It certainly sounds like SensiML might be built into that. Want to get us maybe kind of do the top down here where the confidence is coming from including that. And then I’ll probably have a follow-up on that.

Yes, thanks for the question, Richard. Most of the revenue growth is going to come from the eFPGA-related products by far. That being said, we are forecasting growth in both eFPGA and in SensiML for the year. We give a little bit of airtime to SensiML on the soon to be rolled out private label version of the tool with the microcontroller company. And so some of the anticipated revenue from that initiative is definitely baked into the second half of the year. But again, I would say, the ones that we have more clear line of sight to between now and the end of the year falling into the eFPGA product category.

Okay. And then how much of – from the embedded FPGA category, are you baking any more revenues or at least more confidence in the strategic Rad Hard and then also to what degree are you seeing increased activity within the 12 nanometer node that you talked about last quarter and added a little bit more commentary this one.

I’ll go in reverse order on the questions there. On the 12 nanometer, we are seeing a lot more activity on that node and a lot of inbound interest now. The more we get out into these, what I’ll call, government or defense oriented trade shows and conferences, we’re starting to get higher visibility in what we’re doing and a lot more inbound interest on that, so that’s increasing our confidence on getting multiple 12 nanometer licenses this year. On the government contract, I’m really not at liberty to say much other than there is some revenue from that built in to the forecast, obviously, and we’re feeling comfortable to include some of that in the back half of the year as well.

Okay. And then as we think about your second half of the year where you’re talking about positive pro forma operating income here. How do we think about the gross margin dynamics? I understand there could be some volatility on the delivery of the embedded FPGA contracts. So how do we think about the gross margins as we go into the back half?

Yes. Richard, I’ll take that. The company’s outlook for sure has not changed. We’re still targeting the 60% gross margin long-term. But the mix of deliverables with us getting more development work early on, it’s changed the scheme a bit, so that’s why we are guiding that halfway 55% to that 59%, right? Give or take 10%. So you’re going to see some volatility down the road until probably next year. But the long-term outlook is definitely for the 60s.

Okay. All right. Fair enough. I’ll have one more question and jump out of line here. Brian again, on the embedded FPGA topic, some nice improvement in the pipeline, which is great to see. I’m going to ask a slightly different question, which is kind of understanding how the competitive dynamics in this space are evolving and kind of where do you see QuickLogic having the greater levels of success? You’re talking about success in a lot of different market areas, although government seems to be a fairly concentrated one for you. But maybe you can just talk about the competitive dynamics in this market. That’d be great and that’s all for me.

Sure. So within the embedded FPGA space, there’s primarily three companies outside of QuickLogic that are having an eFPGA based product. One is Achronix, which also does devices, and I think chiplets, they tend to focus on the very high end of the performance range. And so we don’t typically run into them in competitive situations. The IP based – the IP only based startup companies are Flex Logix and Mentor. Flex Logix’s being a U.S. company, Mentor being a French company. They have different types of products than we do. Mentor’s a soft IP company, Flex Logix is hard IP. I think that both of those tend to focus on proprietary tools, just like Achronix and almost every other FPGA company for that matter. So why are we different and why are we winning? You notice that only at Achronix had devices and IP, the other two companies only have IP. Increasingly, what we are seeing with our customers is they like the ability to choose. And what do I mean by that? We offer IP, we offer devices, we have chiplets on our roadmap, as I’ve already discussed, and that provides a choice to the customer in how they want to work with us. We’re not forcing them into one way of doing business. The other thing I’ll say is that our development approach allows us to very quickly provide a core for a customer that is based on their requirements. Again, it’s their choice. We don’t have a singular product on a process node and say, here’s our product. Go make multiple copies of this to get to the requirements that you have. We can actually give them a custom tailored version and an automated approach that meets the requirements. And then last, I’ll say there’s a big buzz now developing around open source tools and the level of transparency and expectability that gives to the end customer. It would be obviously important in areas of security to have that sort of expectability of the tools, but I think other customers are starting to look at that same thing now too, that are outside of the security area. And we are the first company that has really embraced the open source user tools, invested in them to that degree, and providing that as part of our solution to our customers. And I think that’s starting to resonate and create some wins for us. That’s the high level comparison. I mean, there’s other ways that we can go down into details on each and every one and how we would do competitive positioning. But again, if you go back up to the high level, we’re really the only company that has the very fast to market approach and how we deliver IP that ultimately is tailored for the customer, not a stock product. And we’re the only ones that give this choice to customers, whether they want IP all the way to a full turnkey device that they may need. And that’s really resonating with the customers that we’re winning with today.

Okay. Perfect. Love all the detail, Brian. Thanks for that. And that’s all for me.

Thanks.

Thank you. Our next question comes from Martin Yang with Oppenheimer. Please proceed with your question.

Hi. Thank you for taking my question. My first question is on the test chips whose revenue will be recognized this quarter. Can you give us a bit more details on how long does it take from the test chips to higher volume shipments? And what are the key drivers for the timing of a higher volume of revenues?

Thanks for the question, Martin, just for clarity, are you referring to the customer tape-out that we discussed in particular?

Yes, the November, 2022 tape-out.

Okay. Yes. So I would say, in general, it takes a couple of years to go from tape-out to customer shipments. The reason being is that you would typically bake into that some test chip phase and some validation and then a final tape-out and then the resulting manufacturing cycle times, some more validation and then the final bring up by the customer. So, we’re forecasting a couple of years for that reason. That’s fairly typical, I would say. Sometimes it’s longer, like we said publicly, that the bigger government project could be four years and it’s probably understandable why that would be longer. But in most cases, it’s around two years. And by the way, we saw the same for us to even when we were doing chips for ourselves and selling into the customer base. If you have lead customers lined up for that, it still takes a couple of years before they can get something designed into a system, validate it and be ready to take some reasonable volume.

Got it. Thank you. My next question is on private label SensiML. And what does the revenue pattern look like? Is there any upfront payment involved in addition to SaaS revenues when they get traction from their own customers?

Yes, it’s a great question, Martin. So if you, I think, dig through the filings that we’ve done on the financials of Qs and whatnot, I think you’ll see revenue contribution from SensiML has gone up and gone down a little bit. The little going up momentum is around getting payment for some of these things. But it’s not just existing customers or subscriptions, but also some of the work and licensing associated with the private label agreement. And then as we develop and deliver things and then that, that company goes through their integration work, there’s sort of a lull in the revenue for them specifically before they push that out the private label version out to their own customer base and then we start getting follow-on business from their customers. So, we’re in that sort of transition point where they have what they need from us. We had some earlier revenue recognition for that early upfront work. Now they’re integrating and they’re going to launch. And so we’re basing some of the second half forecast and outlook that we gave on the call today, assuming that they are going to be launching that successfully and getting the appropriate level of customer interest converted over to what would be SaaS agreements to us when those customers start using the toolkit in this year and then ultimately royalties from those customers that start using those AI models in a production system.

Got it. Thank you.

Did that answer question?

And my final question is related to this one [ph]. And do you expect more private label deals such as this one for the rest of 2023?

We do expect more private label deals. I think I mentioned this on some previous calls that what we have today with this first one is not exclusive. And so we are well within our rights to proliferate this model further and that is our intent. I would say that the forecast numbers that we have given today on the call do not depend on having another private label deal in place, but it’s certainly our target that we want to go pursue that. The nice thing about software is that once we have a certain development done and a certain way of delivering that to customers or partners in this case, we can repackage that very quickly for other customers and partners, too. So again, once private label is in the first time in sort of a pipe cleaner for rents and repeat type of opportunities with other partners. And so we’re very intense and I know the SensiML team is focused on doing that rents and repeat this year.

Got it. Great to hear. Thank you.

Thanks Martin.

Thank you. Our next question comes from Rick Neaton with Rivershore Investment Research. Please proceed with your question.

Hi Brian. Hi, Elias. Hey, thanks, congratulations on some positive results. I had a question about the balance sheet. I noticed a reclassification of some assets into contract assets and they look like they came from accounts receivable. Can you provide some extra color on that reclassification and what it involves and why it happened?

Well, we every quarter we go through the AR [ph] and just to make sure that whoever is not paying we know you take a reserve against them. We don’t have any bad debts in the company, which is great. People pay us some time, but there were a few assets that part of the review with our independent auditors resulted in us moving them around a bit. It wasn’t that much, but it was just a movement around of certain things that is part of a we call it house cleaning of sorts. But rest assured there is no bad debts in the mix.

Okay. On FPGA markets have been pretty strong for the last year, Brian, and a lot of that strength has been with larger use cases, like in data centers and that. But your revenue outlook for the year is consistent with 30 plus percent growth there at a lot of these FPGA companies. What trend is driving this surge in FPGA interest by customers all of a sudden?

So, it’s a good question, Rick, And I’ve thought about this a lot myself. I think that in general, people are – from a hardware design perspective in general, people like to use standard products. So they don’t have to pay NREs to go off and do their own chip design. And FPGA is our great standard products because they can be personalized by the customer for their use case. So there’s a lot of sort of free use and customization that customers get out of that buying of a standard product. I think that my own personal opinion, I don’t know that this is in any research report anywhere. But my personal opinion is that there were, and continue to be a lot of companies that have taken advantage of the pandemic and raised a lot of prices and made a lot of money not necessarily winning new designs, but let’s say maximizing revenue and profit on one designs previously, one designs. I’m actually very proud in our company and that a lot of the revenue growth that you’ve seen over the last two years has actually been true. New wins, new product wins things that did not exist from a revenue stream perspective more than two years ago for QuickLogic. So I would like to think that that’s a good contrast to what you may be seeing in the general market trend. I think moving forward, companies are having to choose where they put their inventory dollars from a semiconductor company perspective. And what that means is that they’re going to probably stockpile fewer die that move a lot faster than ones that are not moving so much. And they’re going to translate that into longer lead times to their customers. It’s not uncommon these days to hear lead times for FPGAs that have been shipping for a long time to have lead times over 60 weeks, and that puts a huge burden on the customer, right, to know exactly what they’re going to be needing more than a year from now and placing these non-cancelable orders with these suppliers. I think that that’s given people certainly customers of impetus to go off and change suppliers where they may be able to get better lead times or certainly companies that are more flexible to work with them on what the lead time should be. And I think that we’re starting to see some of that now trickle into QuickLogic and also translating, as I mentioned earlier, not just into buying standard products from us, but also companies now that are perhaps below the cut line in terms of allocation from the FPGA supplier perspective, looking at potentially doing semi-custom devices for themselves. So that they can know that they’re going to get supply of these devices now well into the future. And that’s also driving some – definitely some near-term interest for us, although I would say that we don’t have that kind of a thing baked into the forecast for this year, which I think is hopefully a positive message to the investors.

Okay. I appreciate that color, Brian.

Yes.

I had one final question. In the last few quarters, if a CEO mentions that their company’s working on AI, the stock price jumps about 50%, it seems five or six years ago, Quick had a product called QuickAI. And you’ve kind of morphed or moved forward on this concept in using your IP and your products. What did you learn from that effort a few years ago and what changes have you made that is successfully moving QuickLogic into being a player in AI applications on the edge?

Another great question, Rick. My answer here could take a long-time, but I’ll try to keep it short. So I think – so if you rewind, yes, we had a product QuickAI. QuickAI was EOS S3 our microcontroller plus FPGA device along with some AI software that allowed people to do inferencing at the edge in low-power applications. So we were focused on the very, very far edge of the network where the sensor resides low power silicon doing inferencing so you don’t have to go back to the cloud. Typically, I mentioned that because typically when you see anything to do with AI, it’s really talking about image recognition and computer vision and things related to autonomous driving and data centers, like we’re talking about applications that are not so power sensitive when you read about things in the news. And of course everybody wants to talk about ChatGPT these days. And I can guarantee you that we wrote our script by hand. We did not have ChatGPT writer or script today. The – I think that the – the point that I want to make as far as what we learned is that, we learned that software is actually a huge part of the solution for AI, which ultimately led to the acquisition of SensiML. It also, we learned that it is very difficult to go against very entrenched competitors. So if you think about AI, Nvidia probably comes to mind because if you don’t have something that needs to run at extremely low power, Nvidia is the king of AI for silicon, right, using GPUs. And I think in the five years since then, I mean, how many tens or hundreds of companies have said that they’re an AI startup company now doing chips, and how many of them are actually still around competing with the likes of Nvidia? It’s a pretty small list. So I’m actually – I’m glad that we didn’t continue down the silicon path of developing new chips for AI because that was a very – became a very bloody market very quickly. I think on the software side, I’m glad that we acquired SensiML. I think that if you think about AI software and you just look at the number of acquisitions that have been made in the last year alone on SensiML light companies, it’s actually increasing more and more. I think there was a new one announced today, in fact. And so I think that shows that there is quite a lot of value in the software for that. Who knows what that could lead to for us or the SensiML Group, but I like the fact that we have that expertise and product within the umbrella of quick logic. And then lastly, I’ll say that – it’s been publicly that we’ve looked at FPGA or eFPGA on the same chip as a processor doing AI inferencing at the edge. And that led to some of the research that we did on that Arnold device, the 22-nanometer RISC-V chip with embedded FPGA, that actually that work, that research and the paper that came out of that directly contributed to us closing this 12-nanometer design I mentioned on the call earlier, and the same call last quarter. So, I think that having IP and having software is probably the best way of getting into the type of AI that we can be adding value to because it’s the least capital intensive both of those out of all the things that we could be doing in AI. And it’s also, both of those are something that NVIDIA is not doing, and so we are not competing against the likes of somebody that’s so entrenched like NVIDIA. So I like where we are. I like the lessons we learned, and I think that the way, what we have now for AI allows us to have a story that’s it’s beneficial to the customer. It’s credible and it’s not incredibly capital intensive like some of these AI chip companies are doing as a standalone chip company for that. In fact, I think just to add on to that, and this kind of goes back to Richard’s question about how we compare to different eFPGA competitors, I think Flex Logix and in fact tried to do AI chips in addition to IP, and I don’t think that they’re doing that anymore. So it just goes to show you no matter what team and how much were funding you have in place, it’s pretty darn tough to go after somebody like NVIDIA with a solution. And I’m glad that we’re not attempting to do that here.

Brian, I appreciate all the detail and the length of time you gave in answering both of my last questions. Thank you so much.

You’re welcome. Rick. Thank you for the questions.

Thank you. Our next question comes from Jon Gruber with Gruber & McBaine. Please proceed with your question.

Hi, good afternoon. Yes the funnel $125 million how many years is that? Because unless it’s 40 years, there’d be a point where, if you should be drawing $8 million, $10 million, $7 million per quarter when the funnel to revenue and when does that happen, if it sure hasn’t happened yet.

Yes, thanks for the question, Jon. The funnel that we’re talking about now, the numbers we’re using are about, I would say two years out and in from a total funnel perspective, we’re not going to close a 100% of that. I think nobody would believe that. But these are definitely qualified opportunities that were in architecture discussions or we’re in contract discussions with those customers and believe that a really healthy percentage of that can translate into revenue starting from even the current quarter. In fact converting some of that into revenue for this quarter that would be part of this growth to the $5 million revenue level this quarter, and then sequentially the rest of this year.

Yes, but you’re talking $1 million increase, so we’re not, if it’s – if your win rate is 40% of 120 [ph] and it’s two years, you should be, drawing down $5 million, $6 million a quarter. Why isn’t that happening?

Like I said, I think this is the first quarter we’re going to get to five in a long, long time. And I think that a team is getting much, much better now at qualifying opportunities and converting these into revenue. And you will see that revenue growth starting from this quarter continuing on. And hopefully at some point next year, we’ll be throwing a 10-handle out there instead of fives on quarterly revenue. I think we’d all like to see that.

Thank you.

Thanks, Jon.

Thank you. There are no further questions at this time. I would like to turn the floor back over to Brian Faith for closing comments.

I want to thank you all for participating in today’s call and for your continued support. We look forward to speaking when we report our second quarter fiscal year 2022 results in August or at some of the conferences we are attending over the next few months, including Craig-Hallum on May 31st, Stifel on June 6th and Oppenheimer on August 8th and August 9th. Have a great day. Thank you.