QuickLogic Corporation
Q2 2013 Earnings Call Transcript

Published: 1 Aug 2013

[Operator:]

Ladies and gentlemen, good afternoon. At this time, I’d like to welcome everyone to the QuickLogic Corporation Second Quarter Earnings Results 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) Today’s conference call is being recorded. With us today from the company are Andy Pease, the President and Chief Executive Officer; Ralph Marimon, Chief Financial Officer; and Brian Faith, Vice President of Worldwide Sales and Marketing. At this time, I would like to turn the call over to Ralph Marimon, Chief Financial Officer. Please go ahead sir.

[Ralph Marimon:]

Thank you, and good afternoon. Before we get started, let me take a moment to read our Safe Harbor statement. During this call, we will make statements that are forward-looking. These forward-looking statements involve risks and uncertainties, including, but not limited to stated expectations relating to revenue from our new and mature products, statements pertaining to our design activity and our ability to convert new design opportunities into production shipments, market acceptance of our customers' products, our expected results, and our financial expectations for revenue, gross margin, operating expenses, profitability and cash. QuickLogic’s future results could differ materially from the results described in these forward-looking statements. We refer you to the risk factors listed on our Annual Report on Form 10-K, quarterly reports on Form 10-Q, and prior press releases for a description of these and other risk factors. QuickLogic assumes no obligation to update any such forward-looking statements. This conference call is open to all and is being webcast live. For the second quarter of 2013, total revenue was $5.1 million, which is above the high end of our guidance range. New product revenue totaled $3.1 million. The increased revenue was primarily due to initial production shipments of our ArcticLink III VX platform to our new Tier 1 customer. Mature product revenue in the second quarter totaled $2 million, which was essentially flat with the Q1 level and at the midpoint of our guidance. Our Tier 1 customer accounted for 46% of total revenue during the second quarter. New product revenue generated by other customers declined slightly during the quarter, but we expect that to increase during the third quarter. Our non-GAAP gross profit margin for Q2 was 38% and was below our guidance. The decrease in gross margin is primarily due to the mix of customers and products shipped. We are forecasting higher gross margin in Q3, and over the long-term, we expect to realize a non-GAAP gross margin of approximately 50% is our strategic initiative to build traction. Non-GAAP operating expenses for Q2 totaled $4.5 million, which was at the midpoint of our guidance. On a non-GAAP basis, the total for other income, expense, and taxes was a charge of $129,000. This resulted in a non-GAAP loss of $2.7 million, or $0.05 per share. We ended the quarter at approximately $17.8 million in cash. During the quarter, we used approximately $2.1 million in cash, which was favorable to our guidance due to better than anticipated collections during the quarter. Our Q2 GAAP net loss was $3.2 million or $0.07 per share. Our GAAP results include stock-based compensation charges of $285,000, restructuring charges of $206,000, and a net gain and tax effect of selling our remaining share to TowerJazz Semiconductor, which totaled $92,000. Please see today’s press release for a detailed reconciliation of our GAAP to non-GAAP results. Before turning the call over to Andy, I want to take a moment to acknowledge the 8-K we filed this afternoon that announces a new shelf registration. Our previous shelf registration expired in August 2012, and we believe its good practice to maintain an active registration, then we couldn’t have to fund any increases in working capital we might aid to support future revenue growth. Please also note that during June, we extended our $6 million line of credit with Silicon Valley Bank through the end of June 2014, which provides us with additional flexibility to support our working capital requirements. Now, I’ll turn it over to Andy who will update you on the status of our strategic efforts. Following this, I’ll rejoin the call to present our Q3 guidance.

[Andy Pease:]

Thank you, Ralph. I am delighted to announce that our new Tier 1 customer is Samsung. And Samsung is using our ArcticLink III VX CSSP in their Galaxy Tab 3 7.0, which is a 7-inch tablet platform. Our CSSP has been used for display bridging and increasing battery life by utilizing our immigrated display power optimizer and visual enhancement technologies. I am very happy with Samsung’s decision to use the ArcticLink III VX device and look forward to the success of the Galaxy Tab 3 7.0. Last quarter, I announced that we completed the implementation of our customer engineering engagement model for our ArcticLink III VX and BX CSSP platforms. With these new processes, we are validating our MIPI interface with 16 unique application processors that are offered today from 10 different semiconductor companies. This has enabled us to react much more quickly and efficiently to the flow of new design opportunities that we continue to see. During our last conference call, I announced that we were working with a large application processor supplier to gain QVL, or qualified vendor list status for its new Quad-Core processor. We completed this qualification during Q2 and our ArcticLink III BX MIPI to LVDS bridge is now on the QVL for MediaTek’s MT8389 processor. Last quarter, our ArcticLink III BX was included in a reference design from a U.S. Tier 1 semiconductor supplier that is focusing on the international tablet market. We expect QVL approval from this supplier during Q3. A big influence in the international tablet market, particularly in emerging markets is the Chinese independent design house industry known as IDHs. IDH is similar to original design manufacturers, or ODMs, while an ODM generally targets a specific set of customers and IDH establishes platform designs for a wider set of customers and regions. As such, IDH production volumes can vary. We have won a number of new IDH designs. During Q2, we made initial production shipments to support four unique designs. First is the two we forecasted during our last conference call. Two of these designs are with Water World one of the largest IDHs. We are building on our design win success during Q2. And we believe this trend will continue as we win new designs from the MediaTek Quad-Core QVL approval. During our April conference call, I announced we initiated a design engagement with a Tier 1 consumer electronics company to support an RGB to MIPI bridge requirement in a new digital still camera design. This engagement is still in the implementation stage and continues to move forward. We initiated production shipments during Q2 to support the launch of Kyocera’s dual big Note II smartphone. The dual big Note II is a dual-mode Android smartphone that supports 2G, 3G, 4G, and PHS. We continue to ship CSSPs to support Kyocera’s HoneyBee 5 and Stola PHS handsets. PHS is a cost effective communication standard used in Japan, where Kyocera continues to dominate the market. While the annual volume for PHS handset is lower than a typical smartphone, the production lifecycles tend to be longer. During Q3, we expect to make initial production shipments to support two additional connectivity designs for handsets. Both of these designs use two CSSPs. I am very pleased with the traction we have developed in smart connectivity and look forward to affording additional wins from several active engagements we are working on today. Last April, I announced our catalogue CSSP strategy at the Annual Global Press Electronic Summit. This was very well received with more than 20 articles published by the editors who attended. This strategy enables us to leverage our R&D, sales, and marketing resources to reach a broader set of customers in the highly diverse embedded market, which includes the mobile enterprise and various industrial segments. By developing reference design to use these catalogue CSSPs, our silicon partners can expand their served available market and customers can shorten their design cycles. We have seen increased customer engagement as a result of this strategy. In April, we initiated customer shipments for our first Texas Instruments based catalogue CSSP. Our first customer used its reference design has plans to launch multiple products with our catalogue CSSP solutions. Later in Q2, we initiated prototype shipments to a second customer that is using a similar reference design. Last quarter, we announced our first ArticLink II CX catalogue CSSP. This design enables developers of healthcare, industrial, and infrastructure devices to easily integrate FPIO based WiFi Bluetooth peripherals and connect them directly to processors, USB ports. In addition, we have three new catalogue CSSP reference designs in the works that we believe will be completed during Q3. Two of these use our ArticLink II CX platform and one uses one of our Polar-Pro platforms. All three of these reference designs are being developed in conjunction with partners, and we have confirmed customer for one of these solutions. To scale our business, we are continuing to focus on display and smart connectivity solutions in mobile devices. Our strategic initiatives include broadening our support of application processors and accelerating the introduction grade of catalogue CSSPs. This will enable us to expand and diversify our new product design activity, our customer base, and increase our overall revenue and margins. I would now like to turn the call over to Ralph who will give our Q3 guidance followed by my closing remarks.

[Ralph Marimon:]

For the third quarter of 2013, we are forecasting total revenue of approximately $6 million plus or minus 10%. The $6 million in total revenue is expected to be comprised of approximately $4.2 million of new product revenue and $1.8 million of mature product revenue. The increase in new product revenue is due to increased shipments with our display solutions to Samsung and other customers with our smart connectivity and display solutions. We are forecasting a slight decline in mature product revenue due to lower bookings from our aerospace, test and instrumentation customers. As in prior quarters, our actual results may vary significantly due to scheduled variations from our customers, which are beyond our control. Scheduled changes for existing opportunities and projected production start dates for new opportunities could push or pull shipments between Q3 and Q4 and impact our actual results significantly. On a non-GAAP basis, we expect gross margin to be approximately 40%, plus or minus 3%. Gross margin is driven primarily due to the mix of customers and product shift and continued unfavorable absorption of fixed cost. As I mentioned earlier, over time, we still expect our gross margin to increase to approximately 50% as our other strategic initiatives ramp up. We are currently forecasting non-GAAP operating expenses to be $4.7 million plus or minus $300,000. Non-GAAP R&D expenses are forecasted to be approximately $2.1 million. Our non-GAAP SG&A expenses are forecasted to be approximately $2.6 million. R&D and SG&A expenses are expected to increase primarily due to new hires. Our other income expense and taxes will be a charge of up to $60,000. At the midpoint of our guidance, our non-GAAP loss is expected to be approximately $0.05 per share. Our stock-based compensation expense during the third quarter is expected to be approximately $650,000. We expect to use approximately $2.8 million to $3 million in cash. The forecasted increase in cash usage is attributable to initiatives that support our growth forecast. These include raise in our inventory level to support higher revenue, higher investments in fixed asset to support our roadmap. And as I’ve noted earlier, higher operating cost attributable to new hires. Before we move to the question-and-answer session of today’s call, let me turn the call back over to Andy for his closing remarks.

[Andy Pease:]

During the last call, we said that we would see significant new product revenue growth this year. Today, we have provided solid evidence that we are on track to meeting that commitment. The key takeaways from today’s call are first the use of our solution by Samsung in its Galaxy Tab 3 7.0 tablet platform validates our CSSP strategy with one of the world’s largest consumer electronics companies. Second, through our collaborative efforts with leading semiconductor partners, we continue to expand and diversify our display and smart connectivity solution portfolio, which we believe will lead the higher revenue and improved margins going forward. And finally, we continue to execute on our technology roadmap that includes innovative solution that we believe will grow our served available market and further increase the value proposition of our CSSP strategy. We will now open up the call for questions.

[Operator:]

(Operator Instructions) Our first question comes from Krishna Shankar with Roth Capital. Your line is open.

[Krishna Shankar:]

Yes, Andy and Ralph, congratulations on the nice results and guidance especially with the new products and the top tier design win. So, can you quantify for us going forward the Samsung Galaxy Tab 3 7.0 how that could ramp over the next several quarters. And I guess that have both the bridging and the display enhancement functions. Are you working with Samsung to sort of proliferate your platform within them and other applications or can you just talk about the scope of that relationship going forward?

[Andy Pease:]

Yes, Krishna, really as per our agreement with Samsung, we are limited to what we can discuss about this engagement. As I move forward and as we move forward, we hope we can provide you with more color, but this is really all we can say today about our engagement with Samsung.

[Krishna Shankar:]

Okay and then what about the opportunity with the international especially the Taiwan and Asian tablet market you talked about having scored I guess being on the reference platforms for several semiconductor companies and also MediaTek and working with these independent design houses. Can you talk about the revenue opportunity there both near-term and longer term with some of the international tablet markets?

[Brian Faith:]

Hi, this is Brian Faith, I’ll take that question. So, firstly getting into this IDH market it’s fairly new for QuickLogic and then in general the IDH market is fairly new. As Andy said, the volumes tend to vary quite dramatically. So, we are not in a position to actually say specifically the numbers that we think that the IDHs will contribute. What we can say is that we are optimistic about the prospects there, because we are getting on to these QVLs and that’s really a starting point to engage with these IDHs. They don’t want to start off with something that’s perceived as high risk and being on a QVL really lowers that perceived risk from their point of view.

[Krishna Shankar:]

Okay. And then with respect to the Kyocera, the PHS market do you expect revenues there to be stable and continue where would you describe yourselves in terms of the PHS opportunity?

[Andy Pease:]

Well our, PHS business has been growing over the past number of quarters. And as I’ve said in the conference call the HoneyBee 5 and the Stola PHS will continue or layering on top of that the new dual big Note. And like we also said the lifespan of these PHS phones tends to be longer in general than general smartphones.

[Krishna Shankar:]

Great, thank you. And Ralph in terms of gross margins you talked about 50% sort of being a longer term target, what kind of the timeframe and revenue level would you need with some of this high volume customers to get to that 50% target?

[Ralph Marimon:]

Well, we haven’t talked about timeframe Krishna and we know we only give guidance on one quarter. The question has come up before about breakeven point as well, in longer term our breakeven point is probably around $9 million with the 50% gross margins and we see that as a revenue growth and we have a more balanced portfolio. Right now it’s heavily weighted to the display side of our business. So, the 50% is definitely at least the few quarters away, but that’s sort of what our target is as we head into 2014.

[Krishna Shankar:]

Okay. And then finally on the connectivity and kind of the embedded market, Andy can you talk – it sounds like you have a good traction there with TI reference platforms and the two consumer electronics ones that you mentioned, I know those revenues tend to be very gradual, but can you talk about how that could ramp over the next several quarters.

[Andy Pease:]

We are still giving our arms around what the actual ramp is Krishna, because this is actually somewhat of a new market even for TI, but I can’t tell you that right now the ramp in both the number of customers and what we are seeing in interest level is certainly meeting if not exceeding our expectations.

[Krishna Shankar:]

Great, thank you and congratulations again.

[Andy Pease:]

Thank you.

[Ralph Marimon:]

Thanks.

[Operator:]

(Operator Instructions) Our next question comes from Brian Coleman with Hawk Hill Asset Management. Your line is open.

[Brian Coleman:]

Great, thanks. Andy, how many tablet designs or in total how many designs are you currently shipping production revenue for?

[Andy Pease:]

Brian, we’ve been getting away from the numerating total number of designs, I think that we have a kind of a numerated some of the IDHs which doesn’t accomplish all of it, but we are trying to get away from that because we get into this mathematical exercise that I don’t think it’s really surfaced well especially when you have the uncertainty that exist in this market. But one thing is for sure that our number of our tablets that we are engaged with today is more than it was at the start of the year and we see that growing. We see that tablet market in particular to be a great opportunity for us.

[Brian Coleman:]

Okay and are you seeing equal opportunity among the 10-inch form factor and 7-inch form factor or are you seeing more opportunity in one category than the other?

[Brian Faith:]

This is Brian Faith again, I’ll take that question. We are seeing more opportunity today in the 7-inch and I think that’s consistent with what people are saying in the market where 7-inch tablets are predicted to grow maybe at a faster rate than 10-inch. And then certainly in the display segment we are seeing more 7-inch displays being shipped now than 10-inch. So, I think the trend we are seeing with the connectivity is matching that.

[Brian Coleman:]

Okay, I’m going to – let me ask this question with respect to Samsung, but if you want to answer it more conceptually, I certainly understand that if I see a platform of tablets coming out 7-inch, 8-inch and 10-inch and you secure a design in one, can you help me understand the thinking on what’s going on in the OEM in terms of how they are being designed and what kind of solutions might be in other form factors and why you wouldn’t necessarily be in all three of those designs?

[Andy Pease:]

Each design tends to be somewhat unique and what typically happens and extremely at Samsung and even other groups is when you are working with different form factors in many cases you are talking to different people and they have different proprieties. Also think out then with the 10-inch tablet, the battery is actually physically bigger than in the 7-inch tablet. One of the things that we think makes the 7-inch so power – power being such a big issue is because the form factor is smaller, the battery is smaller. And therefore the need to have as much power savings as possible is absolutely critical. And one other thing I guess I’ll say on the 7-inch tablet because obviously I have one now and I also by the way have a 10-inch tablet. One of the nice things about the 7-inch form factor is the screen is finally big enough to do work on and frankly small enough that it will fit my coat pocket. So, when I go around, I don’t need to carry around the tablet that I have to hold, I can actually put it in my coat pocket and actually by the way 8-inch won’t fit, but 7-inch will, so that maybe one of the reasons why 7-inch is becoming such a popular form factor.

[Brian Coleman:]

Okay. And I think it was in the last call you said you are working with a Tier 1 OEM evaluating MHL capabilities. And I am just curious where that project stands?

[Andy Pease:]

Yes. In terms of MHL, there has really been some technology developments since we started working on that. And new things that have come up namely that MHL of course is a wire line connection between your mobile device and your monitor or your TV. Also there is this issue different scan conversions. In other words that your smartphone has a vertical scan pattern, where your TV has a horizontal scan pattern. And frankly, its issues like this that have us still kind of in the investigation mode as whether we are going to move forward with reference design. If the opportunity is there and we can provide value, then we will.

[Brian Coleman:]

Okay. I think what was the number you said you were qualified with 16 unique application processors with 10 different AP companies, I assume, that’s ARM and non-ARM processor companies?

[Andy Pease:]

I don’t believe that we have actually said what type of processors they are, but I mean mostly ARM, but I don’t think we have actually said. There is no methods about ARM by the way we can work with either.

[Brian Coleman:]

Right, okay. And one last question, well actually two, can you talk a little bit about the design opportunity you are seeing with the MIPI-2, MIPI-4 bridges, are there higher display panels kind of out – the demand for the higher resolution panels, are they exceeding the pace at which people are bringing the P4 processors to market, which is creating an opportunity for you and how long does that opportunity exist?

[Andy Pease:]

So, we have seen opportunities that require that type of bridging interface with their apps processors, maybe more of the mid or lower end processor and they are trying to drive a higher resolution panel that they have available. I don’t know how long that trend is going to continue in the future, but we certainly see opportunities for today.

[Brian Coleman:]

Okay. And then I have seen a number of AP companies bringing out tablet-centric processors. And I would have assumed that they would have had LVDS interfaces. But I guess my understanding is a lot of those even though they are tablet-centric still are native MIPI interfaces. And first if you can just clarify that my understanding is correct and maybe provide a little of color around why a tablet-centric processor would have a MIPI instead of LVDS interface?

[Andy Pease:]

So, I think in some cases, the tablet processors that are being released are simply marketing variance of processors that were intended for the smartphone space. So, they don’t have LVDS. We see that happen quite often. I think there is also processor guys are betting that interfaces are going to change over to MIPI in that space before their next processor variant comes out. So, LVDS is viewed as kind of a laggard interface in that space. And so it’s not necessarily true that people are going to be embedding LVDS in a processor that they are bringing to market for tablet so, we see that timing again actually.

[Brian Coleman:]

Okay.

[Brian Faith:]

Actually to add to that, I think most guys are starting to believe that tablets as you are starting see higher and higher resolutions that even MIPI can’t cut the mustard and there is actually new display standards like EDP, the enhance display port from Intel that people are looking at. So, it’s still a little unclear as to what needs to be driving the larger resolution displays providing our LVDS seems to fit the bill for cost effective solution.

[Brian Coleman:]

Okay, great. Alright, thanks very much.

[Operator:]

Our next question comes from Bob West with NI Tech Research. Your line is open.

[Bob West:]

Hi guys. Thanks for taking my call. Alright, I might add is just really, really nice to see QuickLogic beat guidance I am sure it is for you guys, so congratulations to the whole team?

[Andy Pease:]

Thank you, Bob. We appreciate it.

[Bob West:]

I wanted to begin with a little if I could at least ask a question on design wins, do you have some additional design wins that are scheduled for release beyond Q3 at this point? Could you give some color on that?

[Brian Faith:]

Yes, Bob, this is Brian. The short answer is yes, we do have a wide range of opportunities both IDHs, ODMs, and OEMs in display and smart connectivity. So, it’s kind of stands all the solutions that we just talked about on today’s call.

[Bob West:]

Okay. Now, kind of a historical housekeeping question, I think you may have already answered this, but I am repeating it, my apologies, did you have some IDH wins that were shipped in Q2 and at this point do you have some that were scheduled for production in Q3?

[Brian Faith:]

Yes, I think we try to cover just the value in the call, Bob, but to be specific yes, that we talked about four, one from the previous calls have also gone into production, but just to expand on one of the things that you started to talk about on the call, did the volumes really vary with these IDHs they can go from hundreds of thousands in units down to five digit thousands. So, you can do the math I think for yourself when you figure out how many design wins we are talking about but that just really going to vary widely.

[Bob West:]

And so it really affects the – no real way to calibrate that very well. Okay.

[Brian Faith:]

It’s very difficult.

[Bob West:]

Yes. Andy, going to ask some broader questions about your Tier 1 tablet platform and how that’s developing? First of all, is it going kind of in line with your going in expectations at this point, is that a fair question?

[Andy Pease:]

I tried to cover this upfront with the Q&A, and that is we actually do have an agreement with Samsung. And so we are very limited in what we can with this engagement. Obviously, I want to share as much with the investment community as possible with the engagement, while still maintaining the integrity of the relationship with Samsung.

[Bob West:]

You’ve covered this too, but how would you characterize your display product activity today, back last quarter you indicated that your display product activity is continuing to accelerate, can you give us kind of a favor on that?

[Andy Pease:]

I think that’s still a fair characterization of our display activity. And I guess with that, I want to talk a little bit about what Brian touched about on, and that is this whole IDH phenomenon. Last year, if you ask me what an IDH was, I wouldn’t know what you were talking about. Actually, most people referred to this section of people in China as white box manufacturers. And somehow they have gotten a little more legitimized by now being referred to as these independent design assets. And remember I told you that Water World is one of the largest. Actually, anecdotally, we have heard that they are the largest. And the reason that we haven’t said that in the call is because frankly there is no analyst that’s covering this from a data point of view it’s such a new industry. But what this industry is doing specifically the IDHs are they are attacking third world countries that want to take advantage of the technology improve in a cost effective way. And those are the markets that these IDHs are going after. So, there are a lot of people right now that are talking to China, because they believe that this is an explosive market that really is at the startup of its ramp. And so that’s why we can’t be real clear about the IDH market, because we don’t know, but we certainly see lots of activity. One thing I’d ask you to do if you want to find out the relative size of Water World is looking up on the website and I think you will be surprised that how many engineers, how many locations, and how sophisticated the website is. And actually like we said in the call, two of our designs are with Water World.

[Bob West:]

Okay, very good, thanks. I’ve got a 7-inch tablet question that has been covered pretty well. But it’s on the power savings for 7-inch that you’ve got on your website about a 25% power saving metric for the VEE and DPO and VX version. Is that a part of 7-inch or could you kind of at least give some color on that?

[Brian Faith:]

Yes, I can give color on that Bob. So, basically the power savings that one can derive from using VEE and DPO is really dependent on the systems. These systems have different power consumption characteristics. So, we can’t say blankedly, 25% of 7-inch or 40% on a 10-inch. But generally speaking every time that we’ve done one of these calibrations with the customer it’s always have been a double-digit power savings regardless of the display size. And just to echo one of the comments Andy made earlier power seems to be the more critical in the 7-inch form factor because they are trying keep things very slim and thin on the phone which means smaller battery and smaller battery just amplifies the power problem that display presents.

[Bob West:]

Okay. And that leads to the questions on smartphones, do you – at this point have you, do you have any activity going with smartphones that would relate to their designs?

[Andy Pease:]

Yes, Bob we do have connectivity on the smartphones, but to be clear when you look at the VX, the value proposition is both in display bridging as well as the VEE and DPO for power savings and enhanced visual enhancement in bright sunlight conditions. So, tablets that fits the bill on both cases. And then the smartphone activity, most smartphones do have a display processor matching, so that there is no bridge requirement. However, there are certainly still some smartphone activities that we have, but most to the activities for bridging tend to be in tablets. Most of our activity in smartphones tend to be in smart connectivity.

[Bob West:]

Okay. Well, thank you for that Andy. I had a development question, back in April, Ralph you indicated that your Polar Pro 3 would be up possibly by year end and also that your next generation AL III BX, VX would sample perhaps in first quarter, we’ll ask if you can give us any comment on that?

[Ralph Marimon:]

Yes. What I can say in very general terms is we are making great progress on a roadmap and we are on schedule and we absolutely will give progress and updates as we move forward. But we are not really prepared to give out this information right now we want to cover under NDAs with our customers.

[Bob West:]

Okay. I understand. Thanks. One final and that is maybe it’s a little bit Ralph or maybe Andy you want to deal with that yourself. It’s a question about gross margin and I know that you guys are talking about 50% as the target in the future what kind of levers do you have there on that?

[Ralph Marimon:]

Bob I think there are couple of levers Bob. The first one is probably yes it’s revenue growth and getting the more balanced portfolio. Right now, our new product revenue is heavily weighted to display solutions and we need to get it a bit more balanced with smart connectivity in there as well. So, growing revenue and having a more balanced portfolio is critical. We think we can leverage our current resources and handle pretty significant revenue growth without an increase in resources. So, that’s where we also see gross margin increase as we – in that case have been more favorable absorption our fixed cost.

[Bob West:]

Okay. I think that’s it and again congratulations and best wishes for the quarter ahead.

[Andy Pease:]

Thank you.

[Ralph Marimon:]

Thank you.

[Operator:]

Our next question comes from Richard Shannon with Craig-Hallum. Your line is open.

[Richard Shannon:]

Thank you, gentlemen. I appreciate you taking my question. Most of mine have been answered here but kind of a big picture question I love to ask you. Congratulations on being able to announce Samsung which is obviously a great accomplishment. I guess my question is kind of bigger picture with this specific customer or maybe with other ones you have that’s been able name yet. But what level of stickiness was your products design have within the organization both with engineering and even the management there? You’re getting some sense of not just working with specific projects, but bubbling up to the management level where you can get it used in a bunch of different projects potentially?

[Andy Pease:]

Yeah, well I can’t again talk about Samsung specifically. In general terms and let me just use Kyocera as an example that our – the stickiness of technology is only part of the story. And we certainly think that CSSPs have a very unique value proposition. But as we’ve talked about consistently CSSPs is not only a technology, it’s actually a go to market strategy and what we found in our execution of our go to market strategy is because we are so tightly coupled with a customer engineering organization and again I will use Kyocera as an example that is what gets you repeat business. As much technologies we like to run around the fact of matter is that people deal with people. And when they like dealing with people and they will behave properly and they ask the device sense of urgency then you will be in there for a long time that’s what we are seeing with Kyocera and that’s what we’ve seen too with all our engagements moving forward, because that is the culture here at QuickLogic. People approach process and products will follow.

[Richard Shannon:]

Okay, great, that’s – that is all from me, I appreciate those perspectives. Thank you very much.

[Andy Pease:]

Thank you.

[Brian Faith:]

Thanks.

[Operator:]

Our next question comes from Krishna Shankar with Roth Capital. Your line is open.

[Krishna Shankar:]

Yes, I had a follow-on question on your partnership with MediaTek you announced I guess you have a reference design with them for one of their Quad-Core processors. MediaTek I think has got good momentum in the smartphone market in China, so can you talk about the opportunity with MediaTek both with reference to smartphones and tablets within the China market?

[Brian Faith:]

So, it is Brian, I will take that question and just to be clear we didn’t mention a partnership with MediaTek. We’ve said that we are on their qualified vendor list which is basically saying that they embedded our technology or device and they view that that is low-risk enough for their OEMs to adopt. Their idea is just to adopt for products to you in that specific processor.

[Krishna Shankar:]

Sure.

[Brian Faith:]

So, that being said, obviously they have made their name in the smartphone and they are looking out with other application processor guys in that space. I think there has been some recent press in fact this week about their foray now into the tablets. And people are pretty bullish because one of the things that MediaTek does very well is they put together the whole package (indiscernible) market with. So, it allows them to go to market very fast with very low risk. So, I think that they are going to have a good name and good progress in the tablet space in China, in particular, specifically because of their whole go-to-market strategy. So, I am optimistic about our prospects with them and I will leave it at that.

[Krishna Shankar:]

Okay. And given the success with Samsung, Andy, do you have any sort of updated thoughts on the BX versus VX strategy you have before where you thought that it could perhaps get an early design win at an earlier stage in the process with VX, I mean BX could be a relatively easy quick design win, can you share your thoughts on the BX versus VX market opportunity going forward?

[Andy Pease:]

Yes, Krishna that’s a great question. So, I know that (indiscernible) are how you are doing on the BX versus VX conversion and still it’s a little early to tell, but we always felt like there are two things that had to happen for us to be successful with this strategy. Number one is we have to get on a multiple QVLs with application processor companies. And as you guys have seen it over the past quarters actually we have executed that. To get that conversion to VX is to show a very successful consumer electronics product in the market that actually uses the BX and its value proposition and we now have that as well. So, the one thing I will say about something that is huge for us is that it provides us with an outstanding reference platform or demonstration vehicle to go down to people saying this is what you too can have.

[Krishna Shankar:]

Great, this is very helpful. Thank you.

[Operator:]

This ends our Q&A session. I will turn it back to Andy Pease for closing remarks.

[Andy Pease:]

I want to thank everybody very much for your interest and continued support of QuickLogic. Our next conference call is scheduled for Wednesday, October 30, 2013. We look forward to talking to you all then. Thank you.

[Operator:]

Ladies and gentlemen, thanks for participating in today’s program. This concludes the program. You may all disconnect.