Ladies and gentlemen, good afternoon. At this time, I'd like to welcome everyone to QuickLogic Corporation's First Quarter Fiscal Year 2020 Earnings Results Conference Call. As a reminder, today's call is being recorded for replay purposes through May 18, 2020. I would now like to turn the conference over to Mr. Jim Fanucchi of Darrow Associates. Mr.

Fanucchi, please go ahead..

Thank you, operator and thanks to all of you for joining us. Our speakers today are Brian Faith, President and Chief Executive Officer, and Dr. Sue Cheung, Chief Financial Officer. In line with social distancing practices, management is doing this call from different locations today.

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 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; schedule changes and projected 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.

These statements should be considered in conjunction with the cautionary warnings that appear in QuickLogic's SEC filings. For additional information, please refer to the company's SEC filings posted on its website and the SEC’s website.

Investors are cautioned that all forward-looking statements in this call involve risks and uncertainties and that future events may differ materially from the statements made.

For more details of the risks, uncertainties and assumptions, please refer to those discussed under the heading, Risk Factors in the most recent Annual Report on Form 10-K, the most recent Quarterly Report on Form 10-Q, recent Forms 8-K and other documents we periodically file with the SEC.

These forward-looking statements are made as of today, the day of the conference call, and management undertakes no obligation to revise or publicly release any revisions of the forward-looking statements in light of any new information or future events. In today’s call, we will be reporting non-GAAP financial measures.

These non-GAAP measures should not be considered as a substitute for or superior to financials prepared in accordance with GAAP. 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 products, its planned financial and other announcements, its attendance at upcoming investor and industry conferences, and other matters.

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 at 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..

Thank you, Jim. Good afternoon, everyone, and thank you all for joining our first quarter fiscal 2020 financial results conference call. These are extraordinary times for all of us. There is no question that COVID-19 has brought about a significantly more challenging business environment as well as increased uncertainty.

Our thoughts are with those directly affected by the pandemic and the many people fighting it on the frontlines. Our company has been facing this human health crisis head-on since day one. Based in Silicon Valley, we were one of the initial areas that went under shelter-in-place orders. Since we do serve the U.S.

Military market, our designation as an essential business has allowed us to continue limited operations during the crisis. The remainder, and vast majority, of the QuickLogic team have been working remotely going on, nine weeks now. And we will continue to do so, until we are cleared to return to the office, by the various government agencies.

While we continue to push ahead with the initiatives, I discussed in our last call, we are seeing some COVID-19 related impacts to our customers’ product introductions, as many of them are also working under the more restrictive, shelter-in-place orders.

Without the ability to work onsite, many of our customers’ engineering developments, that typically need to take place in a lab with their own hardware has been delayed. This has resulted in the push-out of some projects ranging from a few weeks to months.

With these COVID-19 related changes, we currently believe fiscal 2020 revenue will be impacted by approximately 20% from what our expectations were when we talked in February. While there is still a great deal of uncertainty in the global economy, we are doing everything we can to maintain a path to profitability, as soon as possible.

And despite this revenue impact, we are still forecasting not only a sequential revenue increase for Q2, 2020. But also stair-step increases, through the remainder of the year. Another important point, I want to stress is that our revenue mix for this year has also changed from the scenario we discussed, during our February call.

While we do see the challenges I just discussed, we have also seen new engagements brought on by the pandemic - some of which may result in revenue this year that were not part of our previous forecast.

With that, COVID-related backdrop, I want to turn to an update on the foundations I discussed in our last call, that are serving as the pillars for future growth, share why I remain confident in our business potential, and why I believe, we will emerge from the current storm a much stronger company, than we were exiting 2019.

We continue to see three specific areas that will drive our annual revenue growth, this year. These include continued strength in our mature product segment, expansion of our SoC products with several multinational OEMs, and continued growth in our SensiML AI SaaS platform user base and eFPGA IP initiative.

Within our mature segment, we have built a healthy and stable military business. The push outs we saw at the end of fiscal 2019 have largely been resolved and sales are mostly back on track.

This certainty in order flow, which is generally not subject to monthly or quarterly movement, is one of the reasons we continue to feel confident, in achieving our profitability objective. We currently believe mature product sales will now account for about half of our total revenue this year.

For our new product segment, which includes primarily our EOS S3, SoC products, SensiML AI SaaS revenue, and eFPGA IP licensing, we have been impacted by the COVID outbreak.

The challenges brought on by the work from home guidelines, both locally and in our customer’s, home regions abroad, will dampen our growth outlook from our expectations just a couple of months ago. One of the biggest bottlenecks has been around the global supply chain, which as you know is geographically diverse.

The pandemic has had a varying impact depending on location. While we are able to satisfy demand for certain mature products using our finished goods inventory in our own facility, limitations with assembly capacity have made it difficult to keep up with certain customer orders, in the June quarter.

The good news is that our supply chain partners have done an amazing job to get back on track. Logistics challenges from reduced capacity, at printed circuit board companies. And delays in shipping these to different R&D facilities around the world, have also introduced their own delays.

And in some cases have pushed back customer launches that include our product to later in the year. These effects directly impacted the program we have with a well-known and fast-growing streaming and smart TV provider.

When we talked in February, and as recently as two weeks ago, we were receiving weekly build forecasts for an always-on voice-enabled remote control that would be bundled with their streaming player to be launched later this year.

Due to COVID-related issues that impacted their own engineering ability to meet product milestones, the remote control will now be shipping without any always-on voice recognition technology, and therefore will not include our device. This change is the primary reason for the reduction in our annual revenue outlook.

Despite this change, the trend for greater adoption of wireless and hands-free remote controls is accelerating, opening the door for more opportunities to generate revenue in this developing market.

We already have additional remote-control engagements moving forward with customers building prototype devices now with EOS S3, leveraging the same solution we developed initially for the streaming content provider. We are also engaging with several OEMs and ODMs to deploy the next generation of wireless earbuds.

While the largest player continues to dominate the market, Amazon, recently entered with their own customized solution. Microsoft also recently announced that they will release their delayed Surface Earbuds as part of their refreshed Surface product. These alternatives, along with several others, are driving additional demand for earbud-type devices.

We are gaining acceptance with several white box ODMs for wireless earbuds and expect this market to contribute meaningful revenue later in 2020 after we achieve formal Amazon AVS certification, and publication on their AVS dev kit webpage. Let’s now move to the smartphone market. Our business with Kyocera is as strong as ever.

We are working closely on several new designs and have not yet seen any COVID-19 related impact. A fourth phone was launched in Q1, bringing the total number using QuickLogic’s EOS S3 platform to four, including one feature phone.

Later in 2020, I still believe we could see as many as six phones using our technology, up from three at the beginning of the year. In the Consumer and Industrial IoT market, our collaboration with both Flextronics and Infineon is deepening and remains an important foundation for us to build on with these multi-national companies.

I previously mentioned that we are in the FLEXino Sensor Fusion Development Kit from Flextronics, which includes a sensor fusion board, featuring our EOS S3 SoC as the host processor, along with Infineon sensors.

While the pandemic has delayed some of the marketing activities, our collective efforts with both Flextronics and Infineon will resume once everyone returns to a more typical working situation.

Moving to our strategic initiative with the mega-cap platform company, in March, we announced the first deliverable from this initiative with a new open source hardware, IoT development kit called QuickFeather.

Developed in conjunction with Antmicro, a European technology company, QuickFeather includes an EOS S3, and is designed to enable the next generation of low-power machine learning capable IoT devices. It supports the 100% open source Zephyr, real-time operating system or RTOS, and the SymbiFlow open source FPGA development tool.

Machine learning applications are being deployed at an amazing rate and we believe the new QuickFeather board will further accelerate that trend. Based on the initial interest from our March press release, we expect to ship hundreds of QuickFeather development systems during Q2.

And while QuickFeather is game-changing for QuickLogic in terms of the sheer number of engineers we will engage and the total available market for our solutions, it is just the tip of the iceberg with respect to this initiative with the mega-cap company.

We are very excited to share that the full scope of the joint development with this mega-cap company and Antmicro is nearly ready to go live. We believe the massive reach of this mega-cap company will open up a user base 100 times larger than our current channel could on its own.

As such, this initiative could drive a correspondingly higher revenue opportunity for the EOS S3 and SensiML AI software. We plan to formally announce this effort and provide more detail via a press release and blog posts in the coming weeks.

Moving to our eFPGA IP licensing business, during Q2, we are happy to announce we signed a license agreement for our eFPGA technology for use in a low volume, radiation hardened application. Due to non-disclosure agreements, I can’t elaborate on any detail beyond that.

However, I can say that we expect to generate a modest amount of revenue in the current quarter from that license agreement, with royalties coming in future quarters.

Moreover, I believe this license, as well as our soon-to-be-announced initiative with the mega-cap company, are helping lay the groundwork for stronger growth in our eFPGA IP licensing strategy moving forward. Let’s now discuss our SensiML AI SaaS business initiative.

SensiML closed Q4 with dozens of customers, up from just three going back to Q1 of last year. As I pointed out in our last call, most of these customers are using the evaluation version of the product.

AI software is a new tool for the market in general, and we are finding that during this ramp-up period, with many of our customers working from home, they have limited access to their own hardware and tools necessary to perform a full evaluation. This is lengthening the time to convert customers to the full-service platform.

While we work to convert more of our direct customer engagements, we are also continuing to add several customers in the evaluation phase from our third party MCU partners, expanding our reach and further building our pipeline.

In February, we announced support for NXP Semiconductor's i.MX RT portfolio of crossover microcontrollers using the SensiML Analytics Toolkit. For SensiML, NXP’s i.MX RT line fills an important segment between existing application processors and the ultra-low power platforms already supported.

NXP customers can leverage the SensiML platform to rapidly and easily build complex multi-sensor recognition algorithms for advanced applications such as predictive maintenance, process control and structural health monitoring.

From a broader perspective, the SensiML relationship with NXP, and partnership with ST Micro, now means we are working with two of the top microcontroller firms. This is in addition to relationships we have already announced with firms such as Nordic Semiconductor.

We are also proud to share that SensiML has been invited to become part of a small consortium of companies whose goal is to tackle the COVID-19 pandemic head-on through the use of AI technology.

There is a substantial amount of research taking place now to better predict, if someone is symptomatic of COVID-19 through the application of low power sensors and AI software. We are actively exploring how SensiML’s AutoML technology can be applied in this area.

To assist in this effort, we will be publishing a website to crowdsource data sets that can be used to build AI models, initially targeting cough analysis. Please see the social media channels for both QuickLogic and SensiML if you are interested in participating in the crowdsourcing of data.

In times of global crisis, it is important that we do our part by enabling easy access to our technology so that it can be used to contribute to a solution.

As such, we will be launching a special $99 trial version of our toolkit to make the power of the SensiML AI platform available for those impacted during this pandemic, including the academic and research community.

Before turning the call over to Sue, I want to reiterate that in spite of this period where it seems circumstances evolve day by day, I am confident we have the foundation in place to drive the company forward to profitability.

While our current revenue outlook for 2020 is being impacted by COVID, the aggressive, proactive actions we took to reduce costs before the pandemic, and the anticipation that gross margins will improve through the year, puts us in a position where revenue of around $6 million should get us to non-GAAP profitability.

I would now like to turn the call over to Sue for a discussion of our recent financial performance and full Q2 outlook.

Sue?.

Thank you, Brian. Good afternoon and thanks to everyone for joining us. For the first quarter of fiscal 2020, revenue was $2.2 million, which was within the guidance range we provided. This compares with revenue of $3.2 million in the first quarter of 2019. Within our Q1 '20 revenue, sales of new products were $540,000.

This compares with $690,000 in the first quarter of 2019. The lower new product revenue from the prior year was primarily due to the continued decline in display bridge sales. Our mature product revenue was $1.7 million, compared with $2.5 million in Q1 of last year.

The decline from last year was due primarily to changes in demand from selected aerospace and avionics customers. In the first quarter of 2020, we had five customers who each accounted for 10% or greater of our sales. Non-GAAP gross margin in Q1 was 52.2%, compared with 62.8% in the same quarter last year.

The lower gross margin in Q1 was primarily due to product mix and some higher margin mature product revenue moving into Q2. We expect our gross margin to rebound to the low 60% range in the second quarter. Non-GAAP operating expenses for Q1 were approximately $4.1 million, down from $4.8 million in the first quarter of last year.

The changes are the result of several cost containment measures enacted over the last year. As I mentioned in our last call, we expect to see operating expense to decline to approximately $3.5 million starting in the second quarter of 2020, resulting from the restructuring effort announced in January.

Within our Q1 operating expenses, R&D was $2.3 million and SG&A was $1.8 million. This compares with R&D and SG&A of $2.6 million and $2.2 million, respectively, in Q1 last year. The net total for other income, expenses, and taxes in Q1 was a charge of $103,000, compared with a $233,000 credit in the first quarter last year.

As a reminder, in Q1 last year, we recorded a one-time tax benefit of $282,000 related to the intangibles from the acquisition of SensiML. Non-GAAP net loss in Q1 was $3.1 million, or $0.37 per share. This compares with a net loss of $2.5 million, or $0.37 per share in the first quarter of last year.

The per share calculation for both periods reflects the one-for-fourteen reverse stock split that was effective last December. Finally, the total cash at the end of Q1 was $19.0 million, compared with $21.6 million at the end of last quarter. Included in the Q1 cash usage was approximately $270,000 in cash-based restructuring charges.

Our cash balance also includes the $15 million draw from the revolving line of credit. Now, moving to our forecast for the second quarter of fiscal 2020, which will end on June 29. Our revenue guidance for the second quarter is $2.5 million, plus or minus 10%.

We believe total revenue will be comprised of approximately $1.1 million of new product revenue and $1.4 million of mature product revenue. Due to a more favorable product mix, including the radiation hardened eFPGA IP license, we should see non-GAAP gross margin to improve to approximately 61%, plus or minus 3%.

We are forecasting that total non-GAAP operating expenses will decline to approximately $3.5 million, plus or minus $300,000. At the midpoint of the range, we expect our R&D to be approximately $1.9 million and SG&A to be approximately $1.6 million.

After interest expense, other income and taxes, at the midpoint of these ranges, we currently forecast our non-GAAP net loss will improve to approximately $2.0 million, or a net loss of $0.23 per share based on approximately 8.6 million shares outstanding.

Most of the difference between our GAAP and non-GAAP results is our stock-based compensation expense. In the first quarter, we had approximately $1.0 million of performance-based RSUs that were cancelled, which resulted in a $398,000 credit for total stock-based compensation.

We expect stock-based compensation to return to the $800 thousand range for the foreseeable future. Finally in Q2, we expect cash usage to be in the range of $1.7 to $2.2 million. The cash usage includes approximately $150,000 for a restructuring-related payment and roughly $500,000 for an EOS S3-related inventory purchase.

Starting this quarter, we are increasing our wafer and assembly starts for EOS S3 to ensure we have the inventory to meet forecasted demand from our customers. Also related to our cash position, last week we successfully secured a Paycheck Protection Program, or so-called PPP loan, from the SBA.

The loan amount is approximately $1.2 million, received on May 8th, and has favorable terms. The first payment of this loan is deferred for six months. We will use the funds primarily for employee payroll and benefits. The full details of this loan are included in the 8-K we filed with the SEC prior to the start of this call.

With that, let me now turn the call back over to Brian for his closing remarks..

Thank you, Sue. While we work through the challenges the COVID-19 pandemic has created, we are executing on all of our product advancements and extending our customer reach and market opportunities. We have created a nimble and lean organization focused on ensuring QuickLogic moves to a path to sustainable profitability.

In closing, I would like to thank all of our stakeholders, including customers, suppliers, and shareholders for their support and partnership.

After protecting our employees and their families, my highest priority is ensuring we do everything we can to help our customers, both in supply of products today and continuing to execute on new product programs to ensure both of our success in the future. That completes our prepared remarks. Operator, I'd now like to open the call for questions..

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] The first question is from Sujeeva Desilva of ROTH Capital. Please go ahead..

Hi, Brian. Hi, Sue.

So guidance, the guidance the new products segment recovering from 500,000 to 1.1 million, can you talk about what the drivers are there? Is that mostly key is there are there other large buckets of revenue that are helping them recover?.

The majority -- not the majority, more than half of that is Kyocera along with some of the other items that we talked about around the IP licensing and then some smaller volume, new product deals that we have, but Kyocera is definitely the big driver of that..

Okay. And then looking ahead for Kyocera, you just you said I believe there's limited impact.

What's the linearity expectation for Kyocera ramped linearly throughout the year? And really was there no changes to the forecast because the COVID even post the quarter close?.

Yes, we haven't seen any real change in their forecast. And I think that -- so from a linearity point of view, Japanese smartphone manufacturers typically launch around spring and in the late fall. And so, the first three phones that I talked about were effectively not fall launched last year.

The fourth one would be categorized as like a spring launch of this year. And then we are anticipating those additional phones to come online, probably in the later summer timeframe for us to ship so that they can launch those in the fall timeframe.

So, by that point, we'll have several phones can currently shipping, which is why we think the revenue for that's going to continue to be strong for this year. But yes, we haven't seen any downside effects from COVID-19 with respect to their shipping pattern..

Okay. I was hoping think Brian, you could clarify on the SmartTV remote control, I believe you said they fell back on an older design unlikely or just a redesign where you weren't designing, and if you could find some color there and what -- they did and how they were able to make that switch? That would be helpful to know..

Yeah, so basically, the way they test their products, they get these things out into, sort of, residential test environments to do user experience testing before they push product out. And the fact that boards are having to be shipped all over the world to get those tests in place and the boards to an appropriate level of quality to ship to them.

All those were delayed and so that basically caused them to miss the window to include that in the big box bundle watch that they were going to do for the holiday season this year, and as such, they're not going to have always on voice in that. They're going to go back to a different version that doesn't support always on-voice for that launch.

So unfortunately, that means that because we're enabling that feature, we're not going to be included in that remote now. There are the customers that working with us, so we're going to reuse the engineering work that we put into that. But, obviously, it's very disappointing from 2020 revenue impacting us..

Yeah, absolutely.

Brian, I’m just trying to understand with an older version of the remote, they fall back on?.

Yes, it's a previous version that does not have always on-voice..

Okay. I understood the dynamic.

And then lastly, a quick question on Amazon, what is the timing achieving that certification?.

Every time I say something like this, I think it gets pushed out. But this time, we've estimate some pretty mature milestone advancements in that area. We've submitted some national documentation and we're in the process of scheduling lab time now with them to get that certification.

So I'm hopeful that it will be done by the end of the quarter, this quarter. But some of that just depends on making sure that we actually get a slot in the lab to do that. And as you can imagine, there's social distancing going on.

So reduce number of resources to do those tests in the lab, but we're working really closely with them and trying to make sure we get an allocated spot and get in to do the testing, and however we're going to pass, because we have a lab replicated here on site.

And we've added our solution with all of the right test criteria to pass, so it's really just a matter of getting into the lab now and getting the paperwork done..

Okay. I'll jump back in the queue. Nice execution in a very tough environment guys..

Thank you..

The next question is from Rick Neaton of Rivershore. Please go ahead..

Hi, Brian. Hi, Sue. Congratulations on some pretty good execution and tough times here.

Are you having any issues at your fab like global foundries that are COVID-related in order that could impact your ability to have enough products to ship?.

Not from a wafer fab point of view. I think they’ve execute very well. And I think with wafer starts we're basically starting now to keep up with the forecasted demand. I think we'll be fine for that. The issues I was alluding to in my part of the script were related to assembly.

We do assemble one of our packages on ESF-3 in the Philippines and they went on very strict transportation policy to the point where our assembly partner there had to basically put up temporary dormitories to have people on site, so they wouldn't have to take transportation, but they're still operating on a very reduced capacity.

I think they've done an amazing job, as I said in the script, and are getting back to normal. And so it's really been an assembly crunch to get through -- not a way for that..

Thanks for that color.

The volume shipments of QuickFeather consistent with what your expectations were through this point in time?.

Well, we are getting ready to ship those. We did the press release launch in March just to make people aware of it. We've got a lot of people wanting boards that we have not shipped yet with very limited marketing on our part so far.

I think once we do actually do this launch in the coming few weeks here, we're going to start to see a lot of influx of interesting orders.

I think that -- I said in the script several hundred or a few hundred boards this quarter, I think we've got a chance to exceed that, a good chance of exceeding that and getting closer to the thousand or so that we'd like to get out there in the coming couple of months..

And when you said that the second product is ready to go live and an announcement in the next few weeks -- in the coming weeks, I think were your words -- is that for additional boards or is that a different kind of product and is that something that will happen this quarter or will that happen in the second half?.

Yeah, I'm glad that you asked the question, so I can probably have more clarity now that we're in the QA section. So QuickFeather is – has just started the starting point of this whole initiative with this mega-cap company. It's one board where there are some tools that we talked about in the press release.

All of that is going to become very clear that this is a very large and strategic initiative between us and this mega-cap company and we will announce in the coming weeks along with the additional tools that come out of this, that you also in the future see potentially a second board coming out that we haven't announced yet, that'll be a little bit in the future.

That'll address a certain different set of users or use cases than the first one. So again, this whole thing when it's finally announced is going to be clear that this is a pretty major undertaking in terms of strategic initiatives cause much further than just that one development kit..

Some of your other strategic partnerships that you've talked about in the past are those being effected by COVID, like SiFive or other partnerships like that or are those remaining on track for later this year, early next year?.

I think some of the really impactful ones, as far as the outbound marketing go is with Infineon and Flextronics because there was a whole series of IoT road shows that were going to take place and these are going to be in person seminars and those are basically put on pause and now everything's being done through ZOOM those types of meetings.

So that's definitely impacted getting out the message and getting designed started with people. I think once we start relaxing and getting back to this point where we can actually go to face to face meetings and we'll start to reinvigorate that, that go to market plan with both of those large companies.

Those are probably the biggest of impacted ones this year..

Okay. One last question, when you talked about, your view of how much your full year revenue might be impacted through all of the COVID effect, your original outlook was mid-to-high teens in terms of revenue. If I do some quick cocktail napkin calculations here, mid-teens seems to still be in play here.

Is that how I should look at it?.

Yeah. I think from a teens point of view, it's more like the lower to mid-teens, where mid-teens are sort of the ceiling of that. And that would be an appropriate way to look at from a revenue for the year..

Okay. Thanks, Brian. Appreciate your information..

Thank you..

The next question is from Richard Shannon of Craig-Hallum. Please go ahead..

Thanks, Brian and Sue for taking my questions as well. Just on the, you talked about the Rick’s question about the military market the opportunity there, it sounded like that's one of the fears that hasn't been affected by COVID.

Is it? Is that something where your expectations have actually improved since last, Brian?.

Yeah. We've seen some pretty steady that your former military customers. They don't seem to have any budgets affected by this, because a lot of the revenue we have today are basically designs are already done. Previously, we're not having a situation where design teams aren't available to get on the hardware.

So yeah, from that standpoint, it's going on really well. We have the embedded eFPGA license, which you can imagine is for a military like application, because it's radiation hardened. And that's a good thing that I think hopefully will lead to others.

What we are seeing, from a military point of view some of the customers that work in secure projects that are on – they have to go home and work now. They can access some of the systems through VPN that they would normally be able to access when they're on premises and so some of those have pushed out conversations around IP licensing.

And I think once they're back online, which should be hopefully in the next month or two, those will start progressing again. But those – for the most part, those weren't part of our revenue plan for this year. Those were longer term engagement..

Okay. Maybe a second off with one of those – one of those comments in there, Brian, regarding embedded FPGA, how would you characterize the impact of from COVID to your podcast? I'm going through my notes and see a mentioned that.

Is your outlook for embedded FPGA lower than what it was or still largely intact?.

That's within the rate changes by product line related to COVID. It was more of a company overall, but I can say that the eFPGA part of the forecast is largely unchanged from pre-COVID to now. The bigger changes run to the other categories of products, Specifically, with the –.

Right. Okay.

If I characterize, how many have embedded FPGA licenses you're expected to find this year, maybe a range, I know you can't predict the exact number, but how many should we think about here that we can announce the identity or at least that you've signed something that's something and get to a half dozen, or is that they'll just let you answer the question..

I think if we got half of this and I'd be – I'd be happy. I was going to say, it's probably going to be ones that I can count with fingers and a thumb on one hand. If we can do that, I think that's a good, good place for us to end up for the year..

Okay. That's helpful. Opportunity with Earbud sounds interesting. But as you've alluded to in your comments it's a market dominated by one large, very large company and you identified a couple of those are coming to the market. They're also large companies.

Is it fair to think of your potential customer bases kind of being ODM serving in Tier 2 and potentially lower market or do you have opportunities with in a company who can get you to what you might consider a Tier 1 type of an opportunity?.

We don't want to engagement that would be classified as a Tier 1. Most of these are Tier 2. Some of which would be done directly or through an ODM.

The interesting thing right now, I think, that's been brought on by this whole pandemic is, so many people are doing -- telecommuting and working from home and that's actually driving more earbud sales, I think, because they want to connect and not have to have the over-the-head speaker or not use the Polycom.

So we do see an increased interest and demand. But for the majority of our funnel, we're talking about Tier 2 guys. There's one Tier 1..

Thank you. Okay. That's helpful. One last quick question for Sue, maybe, kind of a two-parter here. On the guidance for the quarter, I'd missed your gross margin number.

What was that, please?.

Hi, Richard..

Hi, Sue..

Thanks for the question. Hi. For Q2, we've set our non-GAAP gross margin to be at 61% plus or minus 8%..

Okay.

And the follow that up to the kind of the breakeven model, I think, you said $6 million or more, does that still look at gross margins kind of the low to mid 60s or has it changed?.

It's rather low to mid 60. Yeah. So it's a $6 million revenue. Okay. That’s the breakeven profit goal..

Okay. Perfect. I think that's all the questions for me. Thank you, guys..

So, hey, Richard, just, while you're there. I just saw those comments. When I was playing dice, I'm rolling for that day to come for Q2. And moving forward, I believe, I -- unlike you're going the say the 8,000 is today $800,000 per tier to gain that..

I think I did get that. But thanks for reiterating..

Sure. Thank you..

Your next question is from Martin Yang of Oppenheimer. Please go ahead..

Hi, Brian. Hi, Sue.

Can you hear me all right?.

Yes, we can, Martin..

Perfect.

So regarding your business in wireless space -- wireless headset space? How much do you think those business -- potential business are related to Amazon AVS and how much expose to other white label opportunities?.

So the majority of the opportunities by number would be related to Amazon AVS for the headset specifically, because a lot of those are U.S. or European Tier 2 companies.

By volume, there's probably more opportunity for us still in Asia non-AVS, because they have or they tend to have local way – or other local services like in China that they'd like to do these headsets for that are not Amazon. They do not connect AVS. That’s sort of the breakdown of it in our funnel today..

Today you have a distinct difference in the time to market; do you think that AVS will be start showing up on your revenues sooner than the rest? Or there's no distinct difference between the two..

We're forecasting both will have revenue in the second half for us. The steepness of the ramp for the Chinese ones will the higher, just because they do more volume of some of these earbuds or a stick type products. For the for the Western countries, the U.S.

like the AVS ones, even if it was through an ODM, it would probably be a little bit slower to market, just because I think they tend to be a little bit more methodical in their test processes. But certainly once we do get the certification and that becomes basically an ODM type product.

For us, it should help us be more efficient in how we get to revenue because the product essentially is done at that point. Whereas a lot of these engagements in China was just they do need a custom wake word that our provider or software partners can do.

They still have to go through that creation and validation process, whereas on the AVS pilot, it's basically done and ready to go once we passed certification. There's no more changing..

And next question, so regarding an impacts -- on regarding COVID-19, is there impact on your next generation product design in that?.

Not really. We're largely able to do most of our work remote. I think our engineering team has done an amazing job at getting set up promoting and continuing to work on things. So they're progressing on all those initiatives.

The things that I alluded to on the call that haven't been asked about yet in the Q&A section is, is what we can do related to COVID-19 was SensiML. And that's one of the values of having a software business is that we don't really need to be in the office per se to get worked on that and enable people.

So even though everybody's working remote SensiML is teams put together this way of doing crowdsourcing of cost data, getting those models, those baseline models to a point where we either was at least comfortable with mentioning it on the call.

And we're going to put that site public this evening for everybody and anybody to come in and start contributing to that, so we can all be part of that solution. So those types of things I think is we can do that just fine without being in the office.

And in fact, that wasn't even part of our scope on the last call to new opportunity that came up from this, so we're driving on I think will bear fruit..

Okay. Last question for me, then I'll jump back in the queue. So when you talk -- when we look at the opportunity with the mega-cap company, I think QuickFeather is a very catchy name.

And can you help us frame how that solution will be marketed to the broader developer community? Are they going to highlight quick better and your company's name as well?.

Yeah, I think without spilling all the beans right now, they are going to be referring to our name in QuickFeather. They're going to be taking several of those units and helping get those out to their community both internal to that company and focus in their ecosystem. That's what they're going to do.

What we are going to do in parallel, because this is not an exclusive development kit. We are going to be getting it out to our channel partners that we currently have. There's also several open source hardware, guys, gals, folks, communities that we're going to be seeding these boards with.

I think we’ll hopefully have a very positive experience and then start some level of viral marketing with that.

And so those are sort of the three avenues that we're looking at to get the word out about this Board to mega-cap company, our traditional distribution channels and then a more viral marketing approach that people that are really big on open source hardware..

Thank you..

Okay..

This concludes the question-and-answer session. I would like to turn the floor back to Brian Faith for closing comments..

Yes, thank you for your participation in today's call and continued support. We look forward to speaking with you again when we report our fiscal first quarter results -- excuse me, second quarter results in August. Thank you and goodbye..

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation..