QuickLogic Q3 2026 Earnings Call Transcript

QuickLogic (NASDAQ:QUIK) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

QuickLogic Corporation reported third quarter 2026 revenue of $5.1 million, up 153% year-over-year but down 6% sequentially. The decrease was attributed to negotiation delays for a major contract expected to be finalized and contribute to Q4 revenue.

The company forecasts a 55% sequential increase in Q4 revenue, leading to a 72% year-over-year growth for 2026. This includes significant contributions from a U.S. government contract and several new contracts expected to start in Q4, with plans to recognize IP revenue ratably.

QuickLogic highlighted strategic initiatives including new eFPGA Hard IP contracts in automotive, industrial robotics, and biomedical sectors, as well as leveraging their proprietary Australis IP generator to quickly deliver customer-specific solutions.

The company’s ongoing chiplet initiative is gaining traction, with several proposals targeting advanced fabrication processes expected to contribute to revenue in 2027.

Management expressed optimism about future growth, citing strong top-line growth in 2026 and a robust pipeline of opportunities across various sectors for 2027.

Full Transcript

OPERATOR

Ladies and gentlemen, good afternoon. At this time I would like to welcome everyone to QuickLogic Corporation’s third quarter fiscal 2026 earnings results conference call. As a reminder, today’s call is being recorded for replay purposes. I would now like to turn the conference over to Ms. Allison Ziegler of Darrow Associates. Ms. Ziegler, please go ahead.

Allison Ziegler (Investor Relations)

Thank you, Sherry, and thanks to all of you for joining us. Our speakers today are Brian Faith, President and Chief Executive Officer, and Jim Sullivan, Senior Vice President of Finance and Chief Financial Officer. As a reminder, some of the comments QuickLogic makes today are forward-looking statements that involve risks and uncertainties, including but not limited to statements regarding our future profitability, revenue growth and cash flows; expectations regarding our future business; and statements regarding the timing, milestones, and payments related to our government contract; statements regarding expected contracts and the expected magnitude of such contracts; statements regarding the likelihood and timing of storefront opportunities; and statements regarding expected adoption rates and/or orders by our customers. Actual results may differ due to a variety of factors, including delays in the market acceptance of the company’s new products; the ability to convert design opportunities into customer revenue; our ability to replace revenue from end-of-life products; the level and timing of customer design activity; the market acceptance of our customers’ products; the risk that orders may not result in future revenue; our ability to introduce and produce new products based on advanced wafer technology on a timely basis; our ability to adequately market the low power, competitive pricing, and short time to market of our new products; intense competition; our ability to hire and retain qualified personnel; changes in product demand or supply; general economic conditions; political events; international trade disputes; natural disasters; and other business interruptions that could disrupt supply or delivery of, or demand for, the company’s products; and changes in tax rates and exposure to additional tax liabilities.

For more detailed discussions of the risks, uncertainties, and assumptions that could result in these differences, please refer to the Risk Factors discussed in QuickLogic’s most recently filed periodic reports with the SEC. QuickLogic assumes no obligation to update any forward-looking statements or information, which speak as of the respective dates, of any new information or future events. In today’s call we will be reporting non-GAAP financial measures. You may refer to the earnings release we issued today for a detailed reconciliation of our GAAP to non-GAAP results and other financial statements. We have also posted an updated financial table on our IR webpage that provides current and historical non-GAAP data. Please note, QuickLogic uses its website, the company blog, and LinkedIn page as channels of distribution of information about its business.

Such information may be deemed material information and QuickLogic may use these channels to comply with its disclosure obligations under Regulation FD. A copy of the prepared remarks made on today’s call will be posted on QuickLogic’s IR webpage shortly after the conclusion of today’s earnings call. I would now like to turn the call over to Brian. Go ahead, Brian.

Brian Faith (Chief Executive Officer)

Thank you, Allison. Good afternoon everyone and thank you all for joining our third quarter 2026 conference call. 2026 is on track to be a very good year for QuickLogic. Beyond our revenue growth, we have expanded both our customer base and end market penetration. With this momentum, we believe we are very well positioned to continue the growth of our IP business and generate material storefront revenue in 2027. As our new CFO Jim Sullivan will cover in his presentation, we will guide for a 55% sequential revenue increase in Q4 resulting in a full year outlook of 72% year-over-year revenue growth.

With this top line growth, we are also anticipating non-GAAP profitability for the second half of 2026 and cash flow positive operations for the full year. As I’m sure you are aware, Q3 revenue was below the midpoint of our guidance. This is due solely to the fact the customer for the follow-on 1 million contract targeting Intel 18AP extended the scope of our negotiations to include a storefront provision. While this delayed the signing of the contract, it significantly expands the long-term revenue potential for QuickLogic and broadens our partnership with the customer. We expect to finalize this contract and recognize IP revenue during Q4.

This is one of several examples I’ll share with you today that illustrate how we are leveraging our decades of experience in managing third-party IP fabrication, test, package, and logistics to provide storefront solutions for our customers. At the foundation of our anticipated Q4 growth is our ongoing contract with the US government which was increased last year to a total ceiling value of $89 million. We are forecasting the award of a new tranche later in Q4 with revenue recognition contributing a significant percentage of our forecasted Q4 revenue. With two tape-outs funded by this next tranche of the contract planned in early 2027, we believe there will be enough finished devices for us to support initial production quantities through our storefront initiative beginning in late 2027.

We continue to receive and deliver orders for our RAD Pro Dev Kit during Q3. We expect this growing interest to continue and, with a number of evaluations already underway, we are very optimistic that we’ll see initial storefront device demand in 2027. Beyond our US government contract and our internally developed RAD Pro devices and dev kits, we have a number of ongoing and new contracts that we expect will contribute to our forecasted Q4 revenue growth. Due to our ratable revenue recognition policy, most of these contracts will also contribute to our anticipated growth in 2027.

In an October 13 press release, we announced our first eFPGA Hard IP win in the automotive and industrial robotics sectors. This is one of several examples of our success this year in broadening both our customer base and end market penetration in this application. The ASIC uses our eFPGA Hard IP to enable its core battery management and motor control functions to adapt to changing market requirements and use cases. This flexibility allows the ASIC to be programmed to support a wide variety of automotive and industrial robotic platforms, increasing its potential annual volume and extending its product life cycle.

The ASIC will be fabricated on a 16 nanometer process that is commonly used for automotive ICs. While this is our first delivery of eFPGA Hard IP for this process, we are leveraging our proprietary Australis IP generator to deliver customer-specific hard IP very quickly and with minimal engineering expenses. The IP revenue from this contract will be recognized ratably beginning in Q4 and, once the ASIC is in production, QuickLogic will receive an ongoing stream of royalty revenue.

We are forecasting a contract award later this quarter from a major US-based fabless semiconductor company that intends to leverage the advantages of our eFPGA Hard IP in a new IC targeting biomedical applications. In this design, our eFPGA Hard IP will be used for inference and signal processing applications in physical AI. Inference in physical AI is the process of running a trained AI model on real-world sensor data to make decisions or take actions in the physical world.

If we are successful in securing this contract, IP revenue will be recognized ratably beginning in Q4 and, once the IC is in production, QuickLogic will receive ongoing royalty revenue. Several years ago, a company that designs ASICs for the defense industrial base, or DIBs, decided to go with one of our competitors. This company has reached out to us and expressed its desire to move to our eFPGA Hard IP for new designs. We are working closely with this potential customer on a new 22FDX design and believe there is a good potential of finalizing a contract in Q4.

Last quarter I provided you with an initial briefing on what we anticipate will be our second architectural IP license. Earlier in 2026 this customer awarded us a five-figure feasibility study contract to evaluate our eFPGA Hard IP for its unique application. The goal of the study is to determine if a custom implementation of our IP will meet its PPA requirements on its proprietary fabrication process. The evaluation is going well, but we have been advised that will likely extend into early 2027.

We are also working closely with this new potential customer on an ASIC design that will target Intel 18AP. The technical evaluation and negotiations have been completed and we are optimistic the customer will receive funding for this program during the next six months. On May 13th we announced a contract with a $2.7 million ceiling value. In the first phase of this contract we taped out a discrete FPGA that was fabricated on the GlobalFoundries 12LP process in line with our previous forecasts. We have received the test chips from GlobalFoundries and they are in assembly now. We have scheduled the introduction of a 12LP eval kit in late Q4 that incorporates this chip. The eval kit will be compatible with common third-party development environments used by both DIB and commercial customers.

This enables customers to accelerate evaluations of discrete and chiplet versions of the design that we will offer as storefront solutions beginning next year. We are now in the final stages of negotiations with this customer for the second phase of this contract that will extend its value to within $50,000 of the $2.7 million ceiling. In this phase we will work closely with YorChip to co-develop a new FPGA chiplet that will be fabricated using the GlobalFoundries 22FDX process and be co-packaged with the original 12LP test chip.

This new FPGA chiplet will enable connectivity between legacy silicon and newer devices with modern interfaces. If we are successful in winning this contract extension, revenue recognition would begin in late Q4 and extend into 2027. As demonstrated by the ongoing revenue from our mature products that were introduced decades ago, certain defense and aerospace applications continue to benefit from the locked-in one-time-programmable antifuse technology. Beyond the ongoing demand and several new design wins for our existing mature products, certain DIBs have shown an interest in smaller packages than we currently offer. One in particular has contracted with us to fund and qualify smaller packaged versions of existing devices for new designs.

We have samples of these new solutions in house and are on track to ship them to customers along with our FPGA user tools and device programming capability this quarter. Our evaluation of this opportunity suggests it could become a new multimillion-dollar market for QuickLogic that requires only a minimal ongoing operational investment. Based on our customers’ forecast, we expect initial revenue will begin during the first half of 2027. Our chiplet initiative has established solid traction during 2026 and we expect it will accelerate in 2027. We have five active proposals that include designs targeting Intel 18A, Intel 18AP, and GlobalFoundries 12LP fabrication processes. Several of these devices may also be offered as storefront chiplet solutions in 2027. In addition to these, as I mentioned earlier, we have a pending contract for a chiplet design that we will co-develop with our partner, YorChip, that may also be offered as a storefront solution.

This chiplet will be fabricated on the GlobalFoundries 22FDX process and funded within the scope of the $2.7 million eFPGA Hard IP contract. Given the tangible progress we’ve logged during 2026, I believe chiplet solutions will make a meaningful contribution to our revenue beginning in 2027. With that, I will turn the call over to Jim for his presentation of financial data.

Jim Sullivan (Chief Financial Officer)

Thanks, Brian. Hello everyone. It’s good to be here speaking with you today. Now to our results. Total third quarter revenue was $5.1 million. This was up 153% from Q3 2025 and down 6% from Q2 2026. As Brian previously covered, the sole reason revenue was below the midpoint of our guidance range was because the customer extended scope of our negotiations for a specific contract to include a storefront provision. We expect to finalize this contract and recognize IP revenue during Q4 2026. New product revenue in Q3 2026 was $4 million and mature product revenue was $1.1 million. New product revenue was up 324% from Q3 2025 and down 13% compared with Q2 2026.

Mature product revenue was up 2% compared with Q3 2025 and up 33% from Q2 2026. Non-GAAP gross margin in Q3 was 41% compared with negative 11.9% in Q3 2025 and 46.8% in Q2 2026. This was below our outlook due to unfavorable absorption of fixed costs with lower revenue and a larger-than-expected allocation of R&D expenses to cost of revenue. Non-GAAP operating expenses in Q3 2026 were approximately $3.3 million compared with $2.9 million in Q3 2025 and $3.5 million in Q2 2026 due to expense management and the allocation of certain R&D costs from operating expense to cost of revenue.

Q3 2026 operating expenses were below the $3.6 million midpoint of our outlook for Q3 2026. Non-GAAP net loss was $1.3 million, or a loss of $0.07 per share. This compared with a non-GAAP net loss of $3.2 million, or a loss of $0.19 per share in Q3 2025, and a non-GAAP net loss of $1.1 million, or a loss of $0.06 per share in the second quarter of fiscal 2026. The difference between our GAAP and non-GAAP results for Q3 was attributable to non-cash stock-based compensation expenses and restructuring charges.

Stock-based compensation for Q3 2026 was approximately $0.9 million. Consistent with our outlook, stock-based compensation was $0.8 million in each of Q3 2025 and Q2 2026. Restructuring costs were $34,000 in Q3 2026 compared with zero in Q3 2025 and $16,000 in Q2 2026. For the third quarter, two customers accounted for 10% or more of total revenue. At the close of Q3 2026, excluding a $5 million drawdown from our line of credit, net cash was $14.2 million. Our positive cash flow for Q3 benefited from the timing of certain payments which were subsequently made in Q4. This $14.2 million net cash balance compares favorably with our projection of $13 million and with the $3.8 million in net cash we reported at the close of Q4 2025.

The increase of $10.4 million in net cash through the first three quarters of fiscal 2026 includes approximately $9.5 million of net proceeds from sales under our ATM program during the first half of 2026. Now moving to our guidance and outlook for our fourth fiscal quarter, which will end on January 3, 2027. Based on backlog and customer forecasts, our total revenue guidance for Q4 2026 is $8 million, plus or minus 10%. We expect total revenue to be comprised of $7.3 million in new product revenue and $0.7 million in mature product revenue. Based on the anticipated Q4 revenue mix, non-GAAP gross margin for the fourth quarter is expected to be approximately 55%, plus or minus 5%.

Taking the range of our Q4 outlook into consideration, our full-year 2026 non-GAAP gross margin is expected to be 47%, plus or minus 5%. In accordance with GAAP and consistent with industry practice, we record certain labor and tooling expenses associated with our IP contracts as cost of revenue rather than operating expenses. In addition, we also record the depreciation and amortization related to certain capitalized costs and CAD tools as cost of revenue. These cost allocations can cause variability between gross margin and operating expenses quarter to quarter, although they do not affect total operating results.

With that in mind, our Q4 non-GAAP operating expenses are expected to be approximately $3.2 million, plus or minus 5%. Based on this and our lower-than-anticipated Q3 non-GAAP operating expenses, we are reducing our full-year non-GAAP operating expense outlook to a range of $13.3 to $13.4 million from our previous estimate of $13.7 to $13.9 million. The forecasted growth of approximately 12% in non-GAAP operating expenses over 2025, as compared to our outlook for 72% revenue growth, illustrates the strong inherent leverage of our IP business model.

After interest and other income, we are forecasting fourth quarter non-GAAP net income of approximately $1.3 million, or approximately $0.07 per common share on both an outstanding and diluted basis. Based on this outlook, we also expect to achieve non-GAAP profitability for the second half of 2026. The main difference between our GAAP and non-GAAP results is attributable to non-cash stock-based compensation expense in Q4 2026. We expect this compensation will be approximately $0.9 million, consistent with Q3 2026.

As a reminder, there can be movements in our stock-based compensation during any period, and it may vary quarter to quarter based on the timing of new awards and vesting and forfeitures of outstanding awards. As I noted earlier, our positive cash flow in Q3 benefited from the timing of payments that were subsequently made in Q4. Due to the timing of these payments, we anticipate that we will be cash-flow break-even for Q4. Inclusive of this projection, we expect to be cash-flow positive for full-year 2026 and close the year with a net cash balance of approximately $14.2 million. Our cash use will vary quarter to quarter based on the timing of certain payments and collection of receivables.

During Q4 2026, the timing of the expected next tranche in our U.S. government contract and payments made for wafer tape-outs could impact our cash flow. Thank you for your time and with that I will now turn the call back to Brian for his closing comments.

Brian Faith (Chief Executive Officer)

Thank you, Jim. The entire QuickLogic team is proud of the strong top-line growth we are on track to deliver in 2026. What excites us most is the momentum we are building across all of our strategic initiatives, including our forecasted record revenue from IP and related services in 2026. This success is being driven by the inherent leverage of our IP business model, targeted investments and, of course, excellent execution by the QuickLogic team.

We believe this momentum puts us in a strong position to build upon our success in 2027 and beyond through customer contracts and internal investments. We have leveraged the benefits of our proprietary Australis IP generator to develop eFPGA Hard IP for nine unique fabrication processes with customer designs that financed most of this development. Moving into production, we expect a growing royalty revenue stream will contribute to our anticipated 2027 revenue. Growth in the IP business, success tends to build its own momentum. Prospective new customers see our design wins across a wide variety of fabrication processes and a growing number of end markets, and that increases their interest in evaluating eFPGA technology for new designs and their confidence in selecting our eFPGA Hard IP solutions.

As it stands today, we are actively negotiating eFPGA Hard IP contracts with existing and potential new customers targeting defense, aerospace, satellite, data center, biomedical, and industrial applications. We expect several of these to begin contributing to revenue in the first half of 2027. Through internal investments, we introduced our first RAD Pro devices and corresponding RAD Pro dev kit to accelerate our penetration into the lucrative markets that require rad-hard FPGA technology. These dev kits are being evaluated by a number of prospective customers. We believe this will lead to storefront revenue beginning in late 2027. In parallel, the next tranche of our U.S. government contract that is anticipated this quarter will fund two tape-outs in early 2027.

We believe there will be enough finished devices from these tape-outs for us to support initial production quantities through our Storefront initiative beginning in late 2027. In addition to these storefront opportunities, we have ongoing discussions with several other customers and partners to deliver customer ASICs and a variety of chiplet designs through our Storefront initiative beginning in 2027. Beyond Storefront, we also expect to generate significant revenue from eFPGA Hard IP contracts associated with chiplet designs in 2027.

Through our close work with two strategic customers and internal investments, we will introduce a new GlobalFoundries 12LP Eval Kit in Q4 to help customers accelerate evaluations for our embedded and discrete FPGA solutions. We believe this will yield new customer engagements and contract awards beginning in 2027. Through the investments of a strategic customer, we have developed a small package option for our existing one-time programmable mature devices that we believe will open a new multimillion-dollar market for QuickLogic with revenue contributions beginning in 2027.

With the progress we have made this year and with how well it has positioned us for continued profitable growth, I’m hopeful you will share my pride in the extraordinary execution by the QuickLogic team and my high level of optimism in our future success. With this, we will now open the call for your questions. Terry,

OPERATOR

Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Neil Young with Needham & Company. Please proceed.

Neil Young (Analyst)

Hey, Brian. And I want to give my welcome to Jim as well. Look forward to working with you.

Jim Sullivan (Chief Financial Officer)

Thanks, Neil. It’s great to be here.

Neil Young (Analyst)

Yeah. So sounds like you flagged a lot of new contracts, which is definitely good progress. Great to hear. So of the several new contracts that you flagged, you know, some of them, it sounds like they could start in 4Q. So I guess I’m curious, you know, how many of those new contracts actually need to close or, you know, begin producing revenue in the fourth quarter to hit the growth target that you guys laid out for the full year versus, you know, how many of those just represent pure upside?

And then I have a follow-up. Thanks.

Brian Faith (Chief Executive Officer)

There’s about five, let’s say a handful of contracts that we do need to close for the revenue to contribute to Q4. And I’ll remind that the way a lot of these are structured now, being ratable, as soon as we can get those revenue contracts signed, we can start generating revenue in the quarter. So it isn’t the totality or the aggregate of the full contract values, it’s just the ratable portion that we recognize in Q4. Did that answer your question?

Neil Young (Analyst)

Yeah, yeah, yeah. And then the other question I had: so you discussed that gig that had gone to a competitor and it’s now coming back to QuickLogic. That was, you know, pretty good and interesting. So curious what drove that reversal, and do you see other similar, you know, sort of win-back opportunities in your pipeline? Thank you.

Brian Faith (Chief Executive Officer)

Yeah, that’s a good question. So for everybody’s benefit, the competitor on the eFPGA IP that was acquired, or the assets were acquired a couple years ago, was Flex Logix. And that was the primary competitor for hard IP, for eFPGA hard IP. And we already, I would say, recaptured one of those designs last year from them and this would represent the second one. And the reason why I think they’re coming to us is once those assets were acquired by Analog Devices, it was effectively a captive technology at that point. And our understanding is there were no sort of long-term support agreements put in place for that technology and, I guess, for everybody else as well. FPGA technology is put into ASICs or SoCs because you want to be able to reprogram that capability into that chip for the foreseeable future, in some cases decades.

And so that means you’re going to want to have a company that stands by the technology with the software and the support for those decades. And if you have a big company that’s buying the assets and making a captive technology, you are not going to get that long-term commitment of support. And I think that this customer probably saw that this is one of those application examples where they are intending to have this be something that’s supported long into the future. And so it’s a really good opportunity, when they’re already spinning the ASIC or doing a new chip, to introduce a new supplier of that technology. And like I said, I think as far as eFPGA hard IP goes, it was really Flex Logix and QuickLogic that are the predominant ones to find that.

So I think it was a natural evolution for them to come back and look at QuickLogic.

Neil Young (Analyst)

Great, thank you.

Brian Faith (Chief Executive Officer)

Thanks Neil.

OPERATOR

Our next question is from Tyler Burmeister with Lake Street Capital Markets. Please proceed.

Tyler Burmeister (Analyst)

Hey guys, thanks for letting me ask a few questions here. Maybe to start, you know, great to hear the next tranche of the US government contracts on track here to close in Q4 by the end of the year. I wonder if you could just discuss to a degree, you know, what steps need to be completed in order to get that signed. And I guess just really want to understand if, you know, I guess gauge the confidence that that will get done by the year. If there’s anything completely out of your control or if it’s pretty well understood what needs to be done.

Brian Faith (Chief Executive Officer)

I’ll answer with what I am comfortable answering. So if we look back for the entire, you know, four plus years that we’ve been operating on this contract, we’ve always said we don’t know when the next tranche is literally coming in until it comes in. So it’s somewhat of an opaque process. I would also say though that I think if you look back over those last four years, generally speaking, the government’s been very good about making sure that things are contracted on time so that we can continue this momentum on the development side.

And that’s what we’re building into the forecast and obviously the prepared remarks is, I think, our continued demonstration on the technical side, the continued need in the market for this type of technology is what we need to do and what the market needs to do for the government to continue funding. So we’re comfortable to share that assumption with you, the investment community. And that’s probably the extent of what I can say that I see. As far as when the timing of that happens, I don’t want to go further because we’re not really supposed to talk about those types of discussions.

Tyler Burmeister (Analyst)

That’s great. That’s great. I appreciate that. Color, maybe on the, you know, similar, similar thought on the contract, you know, would you be able to discuss, you know, just the size of that next tranche, you know, maybe in comparison to the 13 million you got this year. And then, you know, is that funding going to be for the tape out exclusively? Is that also including the storefront revenue that you referenced, you expect to get by the end of the year or would that be, you know, separate in addition to the, to the investment tranche?

Brian Faith (Chief Executive Officer)

Several questions embedded in that. What I, I won’t say what we think the total tranche is because that’s a detail I’m not comfortable sharing publicly. The second thing I’ll say is that our forecast was that this clearly funds, among other things, the tape-out expenses, which is what I and Jim both said in the prepared remarks. And then the last thing I’ll say is that this whole contract that we’re doing with the government is a development contract.

So it does not include storefront revenue as part of that. This is a development contract. Which is again why QuickLogic took the step to self-fund some of the things with Rad Pro and the dev kits last year so that we could get dev kits into the hands of the defense industrial base so that we could be planting these seeds with our software and the technology so that once the development of this overall program is done, we had, you know, established relationships and engineering evaluation with these customers so we could transition from development to storefront devices.

But to be clear, the development contract with the government is a development contract. It does not include, you know, devices that we would be selling at the end of that. That’s a transition plan.

Tyler Burmeister (Analyst)

Perfect. Perfect. All right, I appreciate that. That’s all from you guys. Thanks.

Brian Faith (Chief Executive Officer)

Thanks, Tyler.

OPERATOR

Our next question is from Gus Richard with Northland Capital Markets. Please proceed.

Gus Richard (Analyst)

Yes, thanks for taking my question. Congratulations on the progress. I was hoping you give us a little bit of color on, you know, how much was the Rad-hard contract revenue in the quarter and, you know, how much was, you know, eFPGA contract and demo boards in Q3?

Brian Faith (Chief Executive Officer)

I guess this will be parsed out in the Q that’s followed. But I think the Rad-hard contract, you can figure it out based on the customer A. I think that that’s about 3 point something.

Jim Sullivan (Chief Financial Officer)

3.4 to 3.5 million.

Brian Faith (Chief Executive Officer)

Thanks, Jim. 3.4 to 3.5, and then mature devices was 1.1, and then the balance would be the eFPGA. There might have been 100k of new product device.

Gus Richard (Analyst)

Right. Okay, so about 350,000 of new FPGAs. Now can we think about that? Because it’s a ratable contract on the eFPGAs, you know, what should we think about the run rate of that in the fourth quarter and then going into next year?

Brian Faith (Chief Executive Officer)

Well, I think one of the benefits of having more ratable contracts is that it starts to dampen the peaks and valleys of the IP revenue. I mean, that’s one of the benefits of doing that. I think in terms of Q4. Well, I guess, you know, the government contract to some extent is ratable also. Right. So if we take that out or… No, actually I’m not going to take it out because that starts to dissect too much detail, I think, on the components of the revenue.

I think, you know, definitely north of 6 million would be ratable-type contracts for Q4. That’ll start to change with the government revenue in 2027. But I think what we’re trying to do is make sure that, you know, in any quarter there’s going to be at least a couple million of ratable IP revenue. As we start layering in more of these IP wins, I think it should get to that point where it’s consistently in that range, which is good because it’s… I mean, that’s just in the near term next year. Obviously we want that to be growing continually through the year.

I think that’s the point at which it becomes a pretty profitable business for us.

Gus Richard (Analyst)

Got it. I can jump back in the queue or keep asking questions, whatever you prefer.

Brian Faith (Chief Executive Officer)

At least one more.

Gus Richard (Analyst)

Thank you. When you think about your opportunities versus, you know, process nodes, you know, you’re working with FDX and 12LP and GlobalFoundries and you’re working in 18A and 18AP. Which ones of those do you see as, you know, your chiplet chip revenue opportunity in the next year?

Brian Faith (Chief Executive Officer)

I’ll answer that by giving some context. So if we look back over the last few years, there’s been a lot of investment by the US Government in an onshore supply chain. And that onshore supply chain includes GlobalFoundries, 22FDX, 12LP, 12LP+. In fact, it includes 18A, 18AP, includes some TSMC nodes down in Arizona as well. And so now I think the shift is happening where it’s not just infrastructure, but it’s now chip designs and chiplet designs that would make use of that infrastructure, which includes wafers and advanced packaging capability. And so that’s the context for my answer where what we’re seeing is a lot of interest in chiplet designs for these onshore nodes. And the, I would say, the top three that we’re seeing are 22FDX and 12LP at Global and either 18A or 18AP at Intel.

Again, because it’s starting to reuse a lot of this capex that went into building the capability onshore for these process nodes. There are other ones, you know, offshore that would be primarily TSMC-based, but I think those tend to be more customer-funded completely versus, you know, augmented by the US Government. So because there’s a preference for us to be closing things sooner and seeing some of that subsidy coming in to offset some of the costs, it would be US-based.

Gus Richard (Analyst)

Okay, got it. Thank you so much.

Brian Faith (Chief Executive Officer)

Thanks, Gus.

OPERATOR

Our next question is from Richard Shannon with Craig Hallum Capital Group. Please proceed.

Richard Shannon (Analyst)

Great, thanks Brian and Jim and welcome. Jim, look forward to working with you as well. Let me ask the first question here on storefront. Brian, in your second round of prepared remarks, you—well, actually, I think in the first part as well—you listed out a number of dynamics that I think you said would contribute to 2027 storefront revenues. I think last quarter you gave some sense of scale here. I think you said low seven figures. Wanted to see, first of all, if that’s still kind of a general range that you think, or it could be higher and then maybe if you could maybe force rank those contributors to that storefront revenues next year.

Brian Faith (Chief Executive Officer)

So some of the storefront revenue would be the initial development of these devices. The second phase is the actual sales of those devices. If we’re talking about ones, you know, that to follow on as what Gus was asking, you know, with these onshore nodes, you know, we’re looking at low seven-figure development for these chiplets. And then to the extent we can turn the design, tape them out, cycle time through fab and start to sell devices next year, like in the second half, just selling these types of test chips would probably be in the low seven-figure range just based on, you know, the quantity of units and the ASP of those units in that timeframe.

Did that answer your question or do I need to go further?

Richard Shannon (Analyst)

So just to be clear, I mean, are you expecting chiplets to be the dominant driver of storefront revenues? Because I thought you mentioned a few different contributors to that. Just to be clear.

Brian Faith (Chief Executive Officer)

No, there’s a few across those different nodes. Some of them could be chiplet. There’s, I’d say, a couple that are not chiplet, that would actually be discrete standalone FPGAs.

Richard Shannon (Analyst)

Okay, let me rule on that. And while I ask a couple other follow-on questions here, it’s been a rarity. I’ve been covering you guys for I’m not sure how long, many years here, and I’ve rarely asked a question on your conference calls about your mature products here, but you seem to be fairly excited about the opportunities at least to extend the revenue stream for a period of time, if not grow here. So with these kind of, you know, new packages and other things here.

So maybe Brian, can you give us an outlook for what you think mature products can do next year after. I mean, do you think this can, can sustain a particular level like the level you’re seeing this year for a couple few years? Or am I over reading what you’re discussing?

Brian Faith (Chief Executive Officer)

No, I think with these new packages that we’re talking about, it helps to expand the market from what we sell into today. And by expand, I really mean newer designs, newer sockets that are becoming available in this particular sector of aerospace and defense. So I mean we have internal models that show the mature product getting up to, you know, $10 million a year through some of these new wins because some of them are higher volume than what we’ve seen historically.

And with this new package, I think we have a way of getting into those that we didn’t have previously.

Richard Shannon (Analyst)

Okay, very interesting.

Brian Faith (Chief Executive Officer)

By the way, I’ll definitely emphasize just one more thing, Richard, on that. This is not us concocting like a market or a problem for a market because we did have a customer that basically helped fund this package development because they see the need and they see the, the void, if you will, that exists between their desire to use FPGA technology for these applications and no FPGA being available and to have these FPGA available, that’s in a small enough package to do that.

Richard Shannon (Analyst)

Thanks for that perspective, Brian. My next question is on the rad-hard contract here. You mentioned two tape outs for next year. Can you describe and delineate what those are for? Perhaps I missed the notion of having two tape outs at the end of this four, four and a half year contract, so perhaps I’ve missed out on that. But I don’t wonder if you can just kind of describe what the two tape outs are for. Are these two tape outs at the same time with like different, you know, logic densities or, you know, are they one after the other?

Maybe you could just delineate what that exactly means. Thanks.

Brian Faith (Chief Executive Officer)

I wish I could go into that detail, but I can’t, Richard. But it is two device tape outs in early 2027.

Richard Shannon (Analyst)

Okay, well, I thought I’d give that a try. I didn’t think you would do it, but I thought I’d try. Well, Let me just ask one last question. I’ll jump out of line here maybe describing the pipeline. I know it’s been a couple years since you tried to quantify the pipeline in dollar value and understand why you’re not doing anything, but I don’t think we’ve had much of a discussion since on what the pipeline looks like. And your discussion here was today and past couple of calls have listed a number of contracts here. So maybe kind of do the top down here on kind of numbers, numbers of potential engagements in the pipeline as well as sketching out what kind of the total value might be if they all come to fruition.

And that’s all for me, thank you.

Brian Faith (Chief Executive Officer)

I think if I gave the number where if they all come to fruition nobody would believe me, so I’m not going to go to that one. But the, you know, we have. Well, let’s start with top down. So what we’ve been talking about for a couple years now is getting to the point where, you know, we’re reliably in that hundred million dollar range of revenue annually and we’re getting a bigger and bigger piece of that billion dollar available market. Some of that being driven from the market for the rad-hard FPGA, some of it being what we could do with rad-tolerant FPGA, some of it doing with IP and some of these chiplets.

And I think this year we’ve made a lot of progress in growing the funnel, even though we’ve not been saying what that funnel number is, but the funnel has been growing this year really from all of those different product categories. And I think that next year is going to be a big marker for us to grow the revenue from this year. And I think we have the funnel to do that again across these different product lines. The development contract with the government, storefront opportunities, eFPGA IP and the mature products, really all of them contributing to this in terms of number of opportunities. So the diversity within the funnel, there’s, I don’t know, many tens of opportunities, all of which are, you know, high dollar value that feed into that funnel value.

So I think we’re ending the good year on a good note with that. I think with the stuff we said that we would be closing out this quarter contractually and then just continued execution on some of these other ones that are already under contract. It bodes well for 2027.

Richard Shannon (Analyst)

Okay, great. Thank you guys. I will jump on the line.

Brian Faith (Chief Executive Officer)

Thanks Richard.

OPERATOR

As a reminder to star one on your telephone keypad, if you would like to ask a question. Our next question is from Rick Neaton with Rivershore Investment Research. Please proceed.

Rick Neaton (Analyst)

Thank you. Hi Brian. Hi Jim. I have one question since we’re at the end of the line here and it concerns your chiplet opportunities. How many of these are developing out of your relationship with YorChip versus a general move toward chiplets and overall semiconductor design in the last few years? Could you elaborate on that?

Brian Faith (Chief Executive Officer)

I can elaborate a little bit. So of all the ones that we talked about on the call, there’s one clearly that has a co development with YorChip out of all the ones. Right. So a small percentage in terms of our total. I would say that it’s an interesting opportunity with YorChip though, because they have a technology that should actually make it easier, less risk, lower cost to do chiplet based architectures. But of course you have to prove out the concept first.

And I think this is really interesting for us and YorChip to be doing this first one because that’ll become the proof point that we hope will be generating more repeat business. And actually this particular customer was really interested in this whole architecture. They thought in fact that this 22FDX chiplet may have a lot of merit even outside of this one particular market that this is being designed for. Because one of the issues with chiplets that we’ve talked about for the last couple years is this notion of how do you connect older technologies with newer technologies.

And they seem to have a promising way of doing that. We just need to prove it out with them and then see if we can replicate that elsewhere. But the short answer to your question is one of the opportunities that we talked about today is with YorChip

Rick Neaton (Analyst)

And what’s driving the other interest in chiplets.

Brian Faith (Chief Executive Officer)

The other interest is, I mean, at a high level it’s the same thing. It’s the fact that people want to start piecing together different chips or chiplets to address an application or market specific need without putting everything into one piece of silicon. So you start to get reuse. Now, the upfront architecture and the upfront development of these chiplets doesn’t save you money because you still have to design chips from day one. But once you’ve done that and you’ve sort of paid that tax, if you will, the reuse is what gives people the ROI that they’re looking for.

And you got to go back to the earlier question. The US has been investing a lot of chiplets because they know, especially for aerospace and defense, that you don’t want to redo a chip every time and you don’t want to go to the most advanced node every time, especially for aerospace and defense. And so now they’re moving from this build out the infrastructure to let’s start proving this out in chiplets. And so there’s other applications around defense and space where chiplets might make a lot more sense.

So that’s the other thing driving these other applications. Now, again, if you’re doing a lot of onshore development for the first time, you’re probably going to be using more advanced nodes. For those first few chiplets that we talked about, 22 and 12 and 18, those are all more modern. We’re not talking about going back to 90 nanometer or 65 nanometer, but the technology that we’re talking about with YorChip could actually go back that far if there’s a demand for that.

Rick Neaton (Analyst)

Thanks for the color. Yeah, that helps.

Brian Faith (Chief Executive Officer)

Great. You’re welcome.

Rick Neaton (Analyst)

Thanks, guys.

Brian Faith (Chief Executive Officer)

Thanks. Thanks.

OPERATOR

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

Brian Faith (Chief Executive Officer)

Thanks, Sherry. As always. Thanks everybody for your continued support. We look forward to seeing many of you next week at Craig-Hallum Alpha Select Conference in New York. In December, we will also be participating in the Virtual Northland Growth Conference and holding meetings through Lake Street. And in January, we’ll be back in New York for the Needham Conference. Thank you again and have a great day. Bye.

OPERATOR

Thank you. This will conclude today’s conference. You may disconnect at this time and thank you for your participation.

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