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 18th, 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 Doctor. Sue Chung, Chief Financial Officer. In line with social distancing practices, management is doing the 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 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 expectation 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 Ten 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 this conference call and management undertakes no obligation to revise or publicly release any revisions 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 webpage 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 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 the 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 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 it out a significantly more challenging business environment. As well as increased uncertainty. Our thoughts are with those directly affected by the pandemic and to many people fighting it on the front lines. Our company has been facing this human health crisis head on since day 1. Based in Silicon Valley, we were one of the initial areas that went under shelter in place orders.
Since we do serve the US military market, our designation of 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 9 weeks now, and we will continue to do so until we clear 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 customer's product introductions, as many of them are also working under the more restrictive shelter in place orders. Without the ability to work on-site, 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 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's 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 step increases throughout 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 us 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. Why I believe we will emerge from the current storm a much stronger company than we were exiting 2019. We continue to see 3 specific areas that will drive our annual revenue growth expansion of our SoC products with several multinational OEMs and continued growth in our SensiML AI SaaS platform user base and Yif, PGA 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 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 then our customers' 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 goods inventory in our own facility. Limitations of 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 of printed circuit board companies and delays in shipping needs to different R And 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 earnings receiving weekly build forecast 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 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 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 earbuds type devices. We are gaining acceptance with several white box Buds and expect this market to contribute meaningful revenue later in 2020 after we achieve formal Amazon ABS certification and publication on their ABS devk webpage. Let's now move to the smartphone market.
Our business of Kyocera is as strong as ever. We are working closely on several new designs that have not yet seen any COVID-nineteen related impact. A 4th phone was launched in q 1, bringing the total number using QuickLogic's EOS S3 platform to 4, including one feature phone. Later in 2020, I still believe we could see as many as 6 phones using our technology, up from 3 at the beginning of the year. In the Consumer And Industrial IoT market, our collaboration which will flex Tronix and Infineon deepening and remains an important foundation for us to build on with these multinational companies.
I previously mentioned that we are in the flexino sensor fusion development kit Flextronics, which includes a sensor fusion board featuring our EOS S3 at the host processor, along with Infineon Sensors. While the pandemic has delayed some of the marketing activities, our collective efforts with both 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 the new open source hardware IoT development kit called quickfeather. Developed in conjunction with AMP Micro, a European Technology company.
Quickfeather includes an EOS S3 and does it 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 Cymbaflo open source FPGA development tool. Machine learning applications are being deployed at an amazing rate, and we believe a new quick featherboard will further accelerate that trend. Based on the initial interest from our March press release, we expect to ship 100 of quick feather development systems during Q2. And while Quickfeather is game changing for QuickLogic in terms of this sheer number of engineers we will engage and the total available market for our solutions, It is just the tip of the iceberg joint development with this mega cap company and at micro is nearly ready to go live.
We believe the massive reach of this megacap 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 Moving to our EFTGA IP Licensing business. During Q2, we 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. Symphom will close Q4 with dozens of customers up from just 3 going back to Q1 of last year. As I pointed out on 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 aiming to add several customers in the evaluation trays from our 3rd party MCU partners, expanding our reach and further building our pipeline. In February, announced support for Nxp Semiconductors, i.mxrtportfolio of crossover microcontrollers using the SensiML analytics toolkit. For SensiML, NXP's I. MXRT 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 STMicro now means we are working with 2 of the top microcontroller This is in addition to relationships we already announced with firms such as Nordics 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-nineteen pandemic head on through the use of AI Technology. There is a substantial amount of research taking place now to better predict if somewhat as symptomatic of COVID-nineteen 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 cost analysis.
Please see 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 I want to reiterate that in spite of this period where it seems circumstances evolved 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 $6,000,000 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 $2,200,000, which was within the guidance or inquiry provided. This compares with a revenue of $3,200,000 in the first quarter of 2019. Within our Q1 20 revenues, sales of new products were 540,000.
This compares with 690,000 in the first quarter of 2019. Lower new product revenue from the prior year was primarily due to the continued decline in display bridge sales. Our mature product revenue was $1,700,000 compared with a $2,500,000 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 5 customers who each accounted for 10% or greater of our sales.
Non GAAP gross margin in Q1 was 52.2% compared with 62.8 percent in the same quarter last year. The lower gross margin Q1 was primarily due to product mix and some higher margin mature product revenue will be into Q2. We expect our gross margin to rebound to the low 60% range in the second quarter. Non GAAP operating expenses for Q1 was approximately $4,100,000, down from $4,800,000 in the first quarter of last year. The changes are the measures enacted over the last year.
As I mentioned in our call, last time we expect to see operating expense to decline to approximately $3,500,000 starting in the second quarter of 2020. Resulting from the restructuring effort announced in January. Within our Q1 operating expenses, r and d was 2,300,000, and SG and A was 1,800,000. This compares with or again SG and A of $2,600,000 $2,200,000, respectively, in Q1 of last year. The net total for other income expenses and taxes in Q1 was a charge of $103,000.
Compared with a 233,000 of 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 dollars. Non GAAP net loss in Q1 was $3,100,000 or $0.37 per share. This compares with a net loss of $2,500,000 or $0.37 per share in the first quarter of last year. The per share calculation for both periods reflects that volume for 14 reverse stock split that was effective last December.
Finally, the total cash at the end of q 1 was 19,000,000 compared with $21,600,000 at the end of last quarter, included in Q1 cash usage was approximately $270,000 in cash basis in cash based restructuring charges. Or cash balance also include a $15,000,000 draw from the revolving line of credit. Now moving to our forecast for the second quarter of fiscal 2020, which will end on June 29th. Our revenue guidance for the 2nd We believe total revenue will be comprised of approximately 1,100,000 of new product revenue and $1,400,000 of mature product revenue due to a more favorable product mix including the radiation hard in the EFTJIP license, we should see non GAAP gross margin to improve to approximately 61% plusor-3 percent. We're forecasting that total non GAAP operating expenses will decline to approximately 3,500,000 plus or minus 300,000.
At the midpoint of the range, we expect our R and D to be approximately 1,900,000 and SG and A to be approximately $1,600,000. After interest expense, other income and taxes At the midpoint of this range, we currently forecast our non GAAP net loss will improve to approximately $2,000,000 or net loss of $0.23 per share based on approximately 8,600,000 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 $1,000,000 of performance based RSUs that were canceled, which resulted in a 398,000 credit for total stock based compensation. We expect the stock based compensation to return to the 8000 dollars range for the foreseeable future.
Finally, in Q2, we expect that cash usage to be in the range of 1.7to2.2000000. The cash usage includes approximately 150,000 for restructuring related payment and a roughly 500,000 for an EOS S3 related inventory purchase. Starting this quarter, we're increasing our wafer and assembly starts for EOSF3 to ensure we have the inventory to meet a 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 $1,200,000 received on May 8th and has favorable terms.
The first, the payment of this loan is deferred for 6 months. We will use the funds primarily for employee payroll and benefits. The full details of this loan are included in the 8 Hayway filed with the SEC right before the start of this call. With that, let me now turn the call back over to Brian on his closing remarks.
Thank you, Sue. While we work through the challenges the COVID-nineteen 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 quick logic moves to a path to sustainable profitability. In closing, I would like to thank all of our stakeholders, including customer suppliers and shareholders for their support and partnership. After protecting our employees and their families, my highest priority is in 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.
Thank you. A confirmation tone will indicate your line is in the question for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. The first question is from Suji Desilva of Roth. Please go ahead.
Hi, Brian. Hi, Sue. So the guidance for the guidance to a new product segment recovering from $500,000 to $1,100,000. Can you talk about what the drivers are there? Is that mostly Kyocera or are there other large buckets of revenue that are helping that recovery?
The the majority, not the majority. More than half of that is Kia, Sarah. 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 Tiosara is definitely the big driver of that.
Okay. And then looking ahead for Tiosara, you just you said, I believe there was limited impact. What's the linearity expectation for Tiercer ramped linearly throughout the year and really, were there no changes to their forecast because of 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 then the late fall. And so the first three phones that I talked about were effectively in a fall launch of last year. The fourth one that 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 time frame for us to ship so that they could then watch those in the fall time frame.
So by that point, we'll have you know, several funds concurrently shipping, which is why we think the revenue for that's going to continue to be strong through this year. But, yeah, we haven't seen any any downside effects from, from COVID 19 with respect to their their shipping patterns.
Okay. I was hoping, Brian, you could clarify on the the smart TV remote control. It's I I I believe you said they they fell back in an older design, if I if I heard me or just to redesign where you weren't designed. And if you could provide some color there on 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. Did your 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 those tests in place and the boards to a a perfect level of quality to ship to them, all of those were delayed. And so it that basically cause them to miss the window to include that in the the big box bundle launch 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 for that launch. So, unfortunately, that means that because we're enabling that feature, we're not gonna be included in that, that remote There are other customers that work for us, so we're gonna reuse the engineering work that we put into that. But, obviously, it's it's very disappointing from a 2020 revenue impact to us.
No. Absolutely, Brian. I'm just trying to understand, was that an older version of the remote they fell back on?
Yes. It's a a previous version that does not have always on voice mail. That's how
I wanna share that dynamic. And then lastly, a quick question on Amazon, ABS, what do you think the timing of achieving that certification is?
You know, every time I say something like this, I think it's soon that it gets pushed out. But this time, we've actually made some pretty material milestone advancements in that area. We've we've submitted some actual documentation, and we're in the process of scheduling lab time now. With them to give us 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 to reduce number of resources to do those tests in the labs. But we're working really closely with them try to make sure we get an allocated spot and and get in to do the testing. I'm confident once when we're gonna pass because we have a lab replicated here on-site. And we vetted 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 job on execution in a very tough environment. Thanks.
The next question is from Rick Neechan 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 at your fab, like, at Global Foundries, that are COVID related in order, that could impact your ability to, have enough product to ship?
Not from a a wafer fab point of view. I think they've they've executed very well. And I think with the wafer starts that we're basically starting now to keep up with the forecasted demand, I think we'll be fine for that. The the issues I was alluding to in my part of the script, Rick, were related to assembly. We do assemble one of our packages on EOS S3 in the Philippines that they went on, a 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 were still operating on a very reduced capacity.
I think they've done an amazing job, as I said in the script, and so we're getting back to normal. So it's really been an assembly crunch to get through, not not a not a wafer fab.
Thanks for that color. Are the volume shipments of quick further 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 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 gonna start to see a lot of influx of interest and orders. I think that, I said in the script several 100 or a few 100 boards this quarter.
I think we've got a chance to exceed that, a good chance of exceeding that and getting closer to the the 1000 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 or in the coming weeks, I think, one of 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?
I'm glad you asked that question right. So I can provide a little more clarity now that we're in the Q And A section. So, quick feather is is just sort of the the starting point of this whole initiative with this mega top company. It's one board where there are some tools that we talked about in the press release All of that is gonna become very clear that this is a a very large and strategic initiative between us and this mega cap company. That we will announce in the coming weeks.
Along with additional tools, that come out of this, that you'll 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 this whole thing, when it's finally now gonna be clear that this is a pretty major undertaking list in terms of strategic initiatives goes much further than just, one development kit.
Some of your other strategic, partnerships that you've talked about in the past are those being affected by COVID, like, sci fi or other partnerships like that, or are those remaining on track for, later this year or early next year?
I think some of the real impact ones, as far as the outbound marketing go, is with, Infiniana Flexronics because there's a whole series of IIT roadshows that were gonna take place, and these are gonna be in person seminars, and those are basically put on pause. And now everything is being done through Zoom. Those types of meetings. So that definitely impacted getting out the message and getting designs started with people. I think once we start relaxing and getting back to the point where we can actually go to face to face meetings, then we'll start to reinvigorate that go to market plan with both of those large companies.
So those are probably the the biggest impact of ones this year.
Okay. One last question. When you talked about your view of how much your full year revenue might be impacted due to all of the COVID effects. 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 clean point of view, it's more like the lower than mid teens. So mid teens is sort of the the feeling of that, and that would be an appropriate way to look at it from a revenue point of view for the year.
Okay. Thanks, Brian. Appreciate your, information.
Next question is from Richard Shannon of Craig Hallum. Please go ahead.
Thanks for Brian and Sue for taking my questions as well. Just let me talk about or ask a question about the the military market and the to do there. It sounded like that's one of the fears it hasn't been affected by COVID. Is that, is that something where your expectations have actually improved since the last conference call burn?
Yes, we've seen some pretty steady orders from our military customers. They don't seem to have any budgets affected by because a lot of the revenue we have today are basically designs that were already done previously. We're not having a situation where design teams aren't available get on the hardware. So yeah, from that standpoint, it's going on really well. We have the embedded PGP license, which you can imagine is for a military like application because it's radiation hardened.
And that's a good 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 that have to go home and work now. They can't 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 2, 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 engagements.
Okay. Maybe, segging off of one of those, comments in there, Brian, regarding embedded FPGA. How would you characterize the the impacts from COVID, to your your, forecast. I'm I was going through my notes quickly. I didn't see any mention of that.
I may have missed it, but Is your outlook for med to FPGA lower than what it was, or is it still largely intact?
Yeah. So we didn't the memory changes by product line related to COVID. It was more of a company overall. But I can't say that the EFCGA part of the forecast is largely unchanged from pre COVID to now. The bigger changes were on the other categories of products.
Okay. Specifically when you have some solutions on someone.
Great. Okay. And, Bryce, can you characterize how many unbended FPGA licenses, you expect to to, sign this year, maybe a range. I know you can't predict the exact number, but How many should we should we think about here that at least we can announce the identity or at least that you have signed something? Is that something I get to a half dozen or, is that Maybe I'll just let you answer the question.
I think if we got to have this and I'd be happy. I was going to say it's probably gonna be, ones that I can count with fingers, and if I'm on one hand. If we can do that, I think that's that's a good good place for us to end up for the year. Okay.
Opportunity with earbuds sounds interesting. But, as you've alluded to in your comments, it's it's a market dominated by, you know, one large, very large company. And You identified a couple others who are coming to the market. They're also large companies. It's fair to think of your your potential customer base of yours kind of be an ODI I'm serving you tier 2 and potentially lower market, or do you have an opportunity with, you know, the, you know, companies who can get you to what you might consider a tier 1 type of an opportunity?
We do have one 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 Udium. 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 and that's actually driving more earbuds sales, I think, because they wanna, you know, connect and and and, not have to have it over the head speaker or not use a Polycom. So we do see increased interest in demand. But for the majority of our funnel, we're talking about, tier 2 cuts.
There's 1 tier 1.
Jerome. Okay. That's helpful. One last quick question for Sue. Maybe kind of a 2 parter here.
On the guidance, for the quarter, I missed your gross margin number. What what that, please?
Hi, Richard. Thanks for the question. Hi. For q 2, it's expect our non GAAP gross margin to be at 61%, plus or minus 3%.
Okay. And to follow that up to the kind of the breakeven model, I think you said 6,000,000 or more, does that still look at gross margins kind of low to mid-60s or has it changed
It's still at a low to the 60. Yeah. So it's a 6,000,000 loan. To get us to place you then profitable. Mhmm.
Okay. Perfect. I think that's all the questions for me. Thanks guys.
So so, hey, Richard, just so while you're there, I just saw their comments. When I was when you guys enrolling, full start day to come, from q 2. And moving forward, I believe, right, I contacted when I said 8 k, it should be 800,000. Per quarter. So if you can't get that.
I think I think I did get that, but thanks for reiterating it.
Sure. Thank you.
The next question is from Martin Yang of Oppenheimer.
Hi, Brian. Hi, Sue. Can you hear me alright?
Yes. We can, Martin.
Yep. Perfect. Regarding a business in wireless space, wireless wholesale space, how much do you think those business potential business are related to Amazon ABS and how much are exposed to other, white label opportunities?
So I would say that the majority of the opportunities by number would be related to Amazon ABS. 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 ABS because they have or they tend to have local wake word or local services like in China that they'd like to do these, headsets for that are not Amazon.
They do not connect to ABS. So that's sort of the the breakdown of it in our in our funnel today.
And,
do
they have a distinct difference in in, the time to market? Do you think that ABS will be start showing up on your, our revenues sooner than the rest? Or are they, there's no distinct difference between the 2?
You know, we're forecasting both. We'll have revenue in the second half for us. The the steepness of the ramp for the Chinese ones to be hired just because they do more volume of some of these earbuds for a stick type products. For the Western countries that use like the ABS ones, even if it was through an ODM, it would probably be a little bit slower to market just because I tend to be a little bit more methodical in their their test processes. But certainly, once we do get the certification and that becomes a basically an ODM type product, for us, the the it it should help us be more efficient in how we get to revenue because the product essentially is done at that point.
Res a lot of these engagements in China with if 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 side, it's it's basically done and ready to go once we pass certification. There's no more changing.
Got it. Next question, so regarding any impact regarding COVID 19, is there any impacts on your next generation product design and roadmap?
Not really. We're largely able to do most of our work remote. I think our engineering team has done an amazing job at at getting getting set up remote and continuing to work on things. So they're they're progressing on all those all those initiatives. The things that I alluded to on the call that, haven't been asked about yet in the in the Q and a section is is what we can do related to COVID 19 with 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 on that and and enable people. So even though everybody's working remote, they've some small teams put together this way of doing, crowd sourcing of of cost data. Getting those models, those baseline models, to a point where we I was at least comfortable with mentioning it on the call, and we're gonna flip 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 it's we can do that just fine without being in the office.
And in fact, that wasn't even part of our our scope on the last call. It's a new opportunity that came up from this. We're we're driving on. And I think we'll bear fruit.
Sounds good. Last question for me, then I'll jump back in the queue. So when we look at the opportunities with the megatrend Company, I think quick feathers are very catching in. And can you help us frame how that solution will be marketed, to the broader developer community they going to highlight quickfeder and your company's name as well?
Yeah, I think without spilling all the beans right now, it's they are gonna be referring to our name and quick feather. They're gonna be taking several of those units and and helping get those out to their community, both internal to that company and and folks in their ecosystem. That's what they're gonna do. What we are gonna do in parallel because this is not an exclusive, development kit. We are gonna 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. But I think hopefully have a very positive experience and then start some level of viral marketing, with that. And so Those are sort of the 3 avenues that we're looking at to get the word out about this board, the mega cap company, our traditional distribution channels, and then a more viral bar approach to people that are really big on the open source hardware.
This concludes the question and answer session. I would like to turn the floor back to Brian Faith for closing comments.
Yeah. Thank you, for your participation in today's call and continued support. We look forward to speaking with you again on WAVE reports. Our fiscal first quarter results excuse me, 2nd quarter results in August. Thank you, and goodbye.
This concludes today's teleconference. You may disconnect your lines at this