Q1 2021 GSI Technology Inc Earnings Call
Please standby we're about to again.
Ladies and gentlemen, thank you for standing by welcome should yes, I technologies first quarter fiscal 2021 results conference call.
This time, all participants are starting to listen only mode. Later, we will conduct a question and answer session.
That's family will provide instructions for those interested in entering Q for the Q1.
Before we begin today's call. The company has requested that I read the following safe Harbor statement.
The matters discussed in this conference call May include forward looking statements regarding future events and the future performance abuse I technology that involve risks and uncertainties that could cause actual results could differ materially from those anticipated.
These results and uncertainties are described in the company's form 10-K filed with the Securities and Exchange Commission.
Additionally, I have also been afterwards I do that this conference call is being recorded today July Thirtyth 2020.
At the real question, Yes, I technology.
Hosting the call today.
The company's chairman President and Chief Executive Officer with him are Douglas Shirley Chief Financial Officer, and DTA, let's share Vice president of sales.
I'd now like turn the conference over to Mr. <unk>. Please go ahead Sir.
Welcome to maybe one or in some people join you looks to be view all seem to go pulled it off older.
When do you plan do you want financial results.
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Those are the Dol the goal. So we have set for Jimmy that once you get into your consultant.
A lot more challenge you to achieve.
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Well, we'll all be this would be the BDC abuse either.
That said, we anticipate improvement from Nokia you just to go Cockle walk musical you.
Chairside Menfolk solid financial 14 weeks, a strong balance sheets.
$59 million total catch apartments, we slowed that.
Despite these challenges.
We are making progress with customer use a few of the kitchen and <unk> Bulls early adopters.
We expect to see them when this year.
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Yes, that's correct coast Qlogic, it's called I put it uses swagger National Science Foundation Center.
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The partnership give the Geos that team gets us to a wide variety <unk> economic growth.
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We understand that he's going to be we'd have to all shareholders, who SQL rone cuts how did you successfully.
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Now I will hand, the call the BDC.
Well discuss all pieces performance you put a detail.
Let's go reduce thinking ilene.
I want to expand on some of the points covered by any means she insights fractals.
Project partnership with SRAC brings resources to just sorry that will help us increase our solutions performance and expand our sphere of influence in this community.
Truck is made up of universities government agencies and companies from the technology military and defense and space sectors.
Fractals project its focus on Gemini solutions and in working with members of shock you will be able to leverage minis resources from this community.
The focus in this partnership is to advance our radiation hardened.
Radiation tolerant product lines and the radiation tolerant GPU.
This new collaboration has already benefited year sites, the treating new relationships working with us to improve the lead a g. board functionality.
In the lingering group White paper it references the wise when institutes work. The paper discusses the if you use performance using K nearest neighbor also known as Kate and and.
For bio medical and pharmaceutical research identify molecules based on their characteristics.
Okay, and then as a search algorithm that is flexible and easy to implement for classifying data based on similarity making it highly suitable for analyzing large data sets like molecular databases. However, the high computational costs are performing that search with CP use and the need for lots of memory.
Hey, performing it can search limits its use in this application.
Gee aside technology is excited to be helping researchers at the Wiseman Institute search for covert 19 treatments.
Wiseman Institute performs can add searches using eight liter GE board loaded with 38 million record database of molecular fingerprints.
Given the Apds flexible design.
They can load the database in different ways, such as 512 gets for fingerprint and 2.3 gigabyte for 10, 24 bits per fingerprint and 4.6 gigabytes.
The GE the lead a G. board.
Even had a larger fingerprints such as 2048 for 40 96 beds that would take too long to run on C.P. use.
You can use performance truly stands out as the databases become larger and more complex.
680 million entry database can be format. It into a dataset of 43.5 megabytes of 512 that fingerprints and loaded onto for either GE boards.
Looking only 4.5 seconds to be surged by comparison, the dataset require more than one hour when process on a CPQ based system.
Another time saving feature of eight to you is the ability to process multiple queries in parallel on the data.
Disability improves batch searches performance also.
This is an important differentiator for they to you, which can do for parallel searches as compared to a GPU, which cannot be parallel searches, but it's good do them in batches sequentially.
For example on the dataset of 38 million well look your finger press discussed above.
And loaded on one we did achieve or a single Korea, we'll take 1.1 seconds.
The car can process 100 different queries at the same time for molecules in 1.41 seconds or 71 queries per second.
Hey, flush and at the sheep, you cannot perform and the Gpus are not as efficient.
The was minus the to users we didn't keyboards to accelerate the discovery effect of compounds that may prove useful and cook at 19 treatments.
Jim and I want to you is being used by researches recent I'm sorry, researchers to identify compound structurally similar to the gun severe and anti viral drug recently shown to be effective in treating severe covered 19 patients.
He's been researchers lift we're done severe has the query molecule or using the chairman <unk> 18, you bundle lead a g. board to perform very rapid similar similarity structure searches in their in house database in their search for compounds to develop new treatments for covered 19th.
As lean stated earlier, we are making Gemini once faster and more power efficient.
We target having an enhanced version available later this year. They achieve its also moving ahead on the next generation.
We are in the early stages, a building awareness of our new chips capability and functionality.
Shifting to the sales break out for the first quarter sales to Nokia were 1.8 million or 24.9% of net revenues compared to 6 million for 45.7% of revenues in the same period a year ago.
And 2.4 million or 28.3% of net revenues in the prior quarter.
Military military defense sales were 30.9% of first quarter shipments compared to 21% or the shipments in the comparable period, a year ago and 30.9% of shipments in the prior quarter.
I didn't quite sales were 46.3%, but first quarter shipments compared to 69.7% in the first quarter fiscal 2020.
44.7% in the prior quarter.
I'd now like to hand adult the call over to Doug go ahead. Please Doug.
Thank you did.
We reported.
Loss of $6.1 billion or twice success per diluted share.
Net revenues of 6.6 million for the first quarter fiscal 2021.
Compared to net loss of $125000.
Or one cents per diluted share I never ever so 13 billion for the first quarter fiscal 2020.
Net loss of 3.8 million or 16 cents per diluted share.
Revenue was 8.5 billion the fourth quarter fiscal 2020.
Gross margin was 46.1% compared to 63%.
The party occurred at 52.5% preceding fourth quarter.
The changes in gross margin were primarily due to changes in product mix sold or three periods.
Total operating expenses in the first quarter fiscal 2021.
$7 billion compared to $8.5 billion.
First quarter fiscal 2020, and they'd put $4 billion prior quarter.
Research and development expenses were $5.8 billion.
Compared to $5.6 million than the prior year period.
If I put $6 million prior quarter.
So in general.
An administrative expenses were 2.9 billion.
Quarter in a jury verdict <unk>.
Compared to 2.9 million for the prior year quarter.
From $2.8 million the previous quarter.
First quarter fiscal 2021 operating loss was $5.7 billion.
229000 bars in the prior year occurred.
$3.9 billion per quarter.
First quarter fiscal 2021 that loss.
Interest and other income for $106000 of attached version of $487000.
Terribly, resulting from a settlement the pretax sort of Israel.
Fiscal years 2016 through 2000 rent change.
Compared to 147000 Larsen interest and other it from.
And attrition of $43000 per se incurred a year ago.
The preceding fourth quarter net loss included interest and other it from $140000 at attached progression with $65000.
Total first quarter pretax stock based compensation expense for $755000 compared to $651000, a comparable quarter a year ago.
$644000 Mccart corridor.
At June Thirtyth 2020.
I'm going to kind of 64.6 million in cash cash equivalents short term investments and $4.9 million long term investments.
Compared to 66.6 million cash cash equivalents or short term investments.
And $4.1 billion long term investments at March 31st 20 <unk>.
Working capital was $67.3 million as of June 30, 20 <unk>.
Versus $70.9 billion at March 31st 2020.
Yes.
Stockholders' equity as of June 30 <unk>.
Was 86.7 million.
<unk> $89.6 billion.
Fiscal year ended March 31st 20 <unk>.
Predicament second quarter fiscal 2021, our current expectations are that revenue leverage was 6 million.
For $2 million, but gross margin of approximately 41, 43%.
Operator at this point, we'll open the call 61 day.
Thank you if you'd like to ask a question on today's call. Please press star one on your telephone.
And she using a speaker for today.
Sure your phone you need to like signal three checklist.
Again that star one if you'd like asking a question.
Well take our first question from Irish instrument with Needham <unk> Company. Please go ahead.
Hey, guys that sorry, taking your question garage Mcgill. Thank you were taking my question. So.
First wanted to ask about like how we can think about Nokia trending for the rest of the air versus your defense customers. Thank you.
Yes, so the forecast we've seen from them or they they should be a slightly up a this quarter and then trending up again in the quarter after.
So we had anticipated the two quarter down the March in the June quarter, which happened. You then the second half was was four catch it turned up in the forecasts are still holding to that.
Gotcha and.
Can you talk about I know you've got a guidance this quarter was weak due to co bid. So the delays can you maybe give some more color on down like how exactly.
It wasn't such a big rights.
Lower than expected revenue.
So if you look at a you know we track revenues, obviously continuously and and when we track revenue. This past quarter through May and June it was very steady for the quarter before and then I'm sorry April and May were very steady June was went down substantially versus March of the prior quarter.
Her and that's part of the the backlog was already loaded the for all the shelter in places for April May and so you can see that it really affected the the a the June quarter. So.
It's really the booking again, if you look at the shelter in place a lot of these folks have never work from home and that take that still challenge for a lot of folks and so we're seeing some of the slowness as a result in front of that.
Gotcha and just take one more question regarding the right at Harte <unk> products. Yeah can you talk about holidays and trending up yeah, there's like any with anything coming up near term. Thank you.
So the red tolerate a is progressing well we have some opportunities we're trying to close the rad hard its been a little bit more challenging if you look at the right hard they tend to go into more national asset type of application. So I'm, you know higher security type applications and so what we're finding with part of this.
Ill turn places that were not able to have some of the communications with the customers.
That we need and the reason for that is since it's a national asset those.
Communications have to be secure communications and there are certain rooms and in facilities, where you can do that well right. Now we're you know, but most of our customers that ourselves aren't allowed to go into these buildings and so the conversations we need to have cannot be done over email or over a cell phone which is insecure.
Sure on secure I should say and so that the right heart is a little bit more challenging in this environment. The red tolerance is progressing.
Got it and though for gross margin wise, that's such a big decline that you're expecting.
Why did it go down.
Very good question it didn't come through Carla correct.
Well the worst for <unk>.
Yes, I think the gross margin is strictly a function of Oh.
Product mix and then.
Also the fact of revenues are down you've got the impact of overhead on gross margin.
It's it's just lower higher margin RSP products being.
Huh.
Shipped in the quarter forecasted to be shipped in the quarter. It also impacted the June quarter, and we expect continued and get back the September quarter or borrow term outlook.
With with your route hardware tolerant and then if you sales and that for existing business picks up again.
Certainly well above 50% and then and what the new business should be 60% of work I think there's just a short term thing are dependent on the business conditions were experiencing right now.
Thank you.
Oh go ahead and take our next question, Jeff Bernstein with Cowen. Please go ahead.
Yeah, Hi, I just wanted to follow up on the on the SEC a partnership or is this the department of energy.
High performance Computing research I guess, there was 3.3 million in federal funding. It was a recently allocated to this or are you getting some of that money or how does this work exactly.
No that's not it's not a grand what does it think of it as more of a group or consortium.
That we.
Get involved with it so it's actually a membership fee that you have to pay to get into it and again when it does is it gives you access to researchers peach tea candidates professors at these universities and also it has folks in there and some government agencies or anything along with prime contractors and then.
Other folks like us and and so why it's important to US is not only are we getting exposed in to the environment that we want what these with these government agencies and prime contractors, but also we have access to these professors and researchers they're doing additional workforce as we mentioned in this.
Gripped.
You know there they're looking at our lead a g. board for improvements in enhancements things like you know if you're looking to lead a g. board we have enough P.J. on there so they're looking at ways to be able to utilized that a P.J. and other applications and other functions. Besides what we're using it for so it's just the way to get exposed.
Sure and also helped build the ecosystem for the for the Gemini program.
Thank you.
And once again that start when if you'd like to ask a question on today's call.
And well take our next question from Kurt Caramanidis with Carl M. Henning incorporated please go ahead.
Hi, guys. You said you get shipped to early adopters I'm just wondering if that's a prototype earlier this year and wiseman or if there have been bother.
Oh people that are early adopters.
Good day actually purchased the board.
Yeah, Cherokee either purchase scare you know whether its or Wiseman <unk> and then I think you had a prototype sold in January February and then the commentary mentioned.
It was shipped to early adopters.
Trying to figure out what that means.
Right so essentially.
Correct. So there are actually the there the last two bars that we shipped out or have actually gone to.
More government agencies, well one of them a prime in another words of government agency in the U.S. and so and we'll see we'll probably see that trend continuing I'm, especially with the work we're doing with Schreck, we should see a few more of these boards shipping.
It may not shipped this quarter, but it will certainly ship by the end of year, we should have a handful more bars that have gone out to to other entities.
Okay. Thanks.
And as a sign or amended that is star wonder if he'd like to ask a question on today's call will take you follow up question kind of Jefferies team with Cowen. Please go ahead.
Yeah, just on the Red tolerant read that hard opportunities I think you guys have talked about needing to get Rad hard parts actually into space or just satisfy some people's desire is to know that they're going to work is that true ups erad tolerant as.
Well and you know obviously you can have a lot of meetings around a rat hard and you also have to find somebody who's who's will do but one of these things and space out how long do you think that ends up taking.
Right, so that that so putting them in space is called haircuts that heritage is much more of a red heart issue. The rack tolerant, it's really a different market space and the fact that historically the folks that have used the red taller have actually kind of got to themselves. What I mean is there hasn't been a.
Rat tolerant marketing folks either offered commercial parts of the offered Rad hard parts.
And so what was happening as some of the folks that were required to have a product can didnt want to pay red hard prices would take commercial parts and then tried out screen them through testing and so what we're doing is we're just taking that burden and away from them and offering them apart and staff. So we're not going to.
All under the same heritage or at least in most cases, we're not going to fall under that same red hard heritage issue with the route tolerance.
Great and then so I guess and nothing the pricing differential.
Should appeal to people.
Yeah.
I hear a lot of does see a the case that you talked about just using commercial off the shelf I mean, you know a lot of so the lower solar that type applications I people. Yeah. These satellites aren't up there for all that long and they're using commercial off the shelf in it and it works fine.
So you know is that sort of up selling them on the insurance policy that.
That wraps aren't is going to serve that function or are there other market segments that you're going after.
So there's other segments, so you're talking about the Leo satellites and like you said some of the yields are up there for a while and sell them are you right. So some of these new watches are happening.
So I took the for two or three years and they're done and so folks like that don't really care, but there are imaging satellites are leo where they're going to be up there for more in a few years and so that's important and also what we're finding is again the cause you to get to Earth I'm, sorry to Earth to the Sun. The more issues you have with all these ah.
Cogs upgrades or what have you and so what we're seeing is somebody's boards or projects, we're working on things like.
Probes are going to Mars or going to somebody's asteroids to do mining or what have you that's actually going away from the Sun and so they don't need Rad hard they read toward sufficient but these are things are going to be out there for a while and so just getting commercial off the shelf parts isn't going to work they do need to have some insurance that these things.
I have some some form of robustness they cannot take that she has a 70 something to Mars or what have you would have it failed.
Good months or a year.
That's great. Thank you.
[noise] and seeing is there no further questions. This concludes today's question and answer session I would now like turn the call back over to Mr. shoe for any additional closing remarks.
Thank you all for joining US we look forward to speak we see look and when we already pull a second quarter physical of infantry wondering though.
<unk>.
Once again that does conclude today's conference. Thank you very much for your participation you may now disconnect your funding.
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