Q3 2021 GSI Technology Inc Earnings Call
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Ladies and gentlemen, thank you for standing by.
Welcome to GSI technology third quarter fiscal 'twenty and 'twenty One results conference call for the quarter ended December 31, 2020 <unk>.
This time all participants are in a listen only mode. Later, we will conduct a question and answer session at that time, we will provide instructions for those interested in entering the queue for the Q&A.
Before we begin today's call company has requested that I read the following safe Harbor statement. The matters discussed on this conference call May include forward looking statements regarding future events and the future performance of GSI technology that involve risks and uncertainties that could cause actual results to differ materially from those anticipated.
These risks and uncertainties are described in the company's form 10-K filed with the Securities and Exchange Commission.
Additionally, I have also been asked to advise you that this conference call is being recorded today January 28, 2021 at the request of GSI technology <unk>.
Hosting the call today as we lean into the.
And the company's chairman President and Chief Executive Officer with him are Douglas Shirley Chief Financial Officer, and DDA was share Vice President of sales I would now like to turn the conference are Mr. Hu. Please go ahead Sir.
Good afternoon, and thank you for joining the call today to review also quarter on do you probably one financial results.
And I looked back and plenty of turnkey and where we work a year ago.
And I'm pleased with all 12 hours.
Yes, I ended the fourth quarter of the year.
Pardon me one.
We still see I mean, not too long and Cobra.
Our team is building new relationships with customers in many sectors.
And if you couldn't do you book value corporate for market improvement.
And you can search applications.
We have engaged a PR firm.
Awareness and thank you and pool.
Pull from our evolutionary technology squeezed liquidity.
Feedback has been good and we are.
And the reception to everyone.
The next step is to allow come from most of it through the system.
This time last year, we had prepared our question and training facility and you're all Sunnyvale, California headquarters.
Unfortunately, Colgate Triple net.
The option available and.
And sale, but bringing group.
And to all facility, we have had to pivot.
The result is there'll be more one on one of course.
I'll call based Apu question silver.
Oh, good morning, and both are off on city tiers and ease of here.
Some of you.
And you from silver and.
And our customer to be bold and low Lille database almost with the Apu.
And tests per device per Boe months.
And we used the day of proprietary data and applications.
And I'm pleased that we can now interact with all prospective customers and.
And give them access to.
So you gave you with Jimmy.
There'd be more process.
And Thats the free shipping or would you know walk shelf set up.
He is the best option, we have under the circumstances.
So the SaaS stated on our last earnings call all software capability.
A P you had extra growth.
To do applications.
Sulfur you influence and continuing to improve the devices for purpose.
We have successfully doubled it and so.
Some cases simple the system performance on.
And with Comstock.
This per month, we would argue against the comparator spec for Tyson.
Scott.
And your ecosystem.
We plan to follow with the competitors stack for she process and cost.
Later this year.
Yes.
Yes that has a bureau are you expecting on software too.
Have you done per layer, so paired with simple walk we first price and there is a lady Ministry of Defence market Challenge.
The challenge and scope was big growth potential.
Well advanced data science and metrics to.
And to improve its already ministry of defence occurred and data products.
The challenge was code distinguish between human and.
And animals you'd radar signal Sigma.
With the greatest accuracy.
So you have to work with Congress, China and people the GSI.
Jorge the low prior year periods, even later on.
Where do you need from research from various SKU reference global World you on career paths. This Charlie.
And quite a unique solution.
Leveraging the Alberta and so we.
The bill.
On the other search projects, we developed operators and to trim.
And model to better predict the outcome.
First of all resolved or winning all the market challenge.
Martha has and introduce GSI to key Israeli aerospace and defense companies for several different deepens projects that's.
Well, that's providing opportunities to work with the market to call.
Several commutation clauses employee and all Apu.
We are pursuing new opportunity, we started development on the last few social properties.
Elastic search use the popular open source from.
<unk> search engine that consists of many types of documents.
You lost your first recently and the thanks Victor.
<unk>.
But ultimately the end of it.
And just to do a vision well wasn't adult who submitted and search.
So Lindsay excursion allows for appraisal.
Oh, the soldiers in Britain, and provide better quality search results and traditional keyword search.
However, the lack over the edible flow approximate New York Labor all in and.
Solution, you and obviously search they can leverage their 10th Victor for you.
It's created an opportunity for GSI.
Since many companies already used and you'd asked if you search.
So according to <unk> and <unk>.
And it obviously will be very doable, especially a high performance yanofsky search solution that scales to a building scale great per similarity search.
In response, we developed and you don't see it.
And and parking laski see coffee as a way to enhance the coal you lost your search functionality and that.
Customizable minimums.
This property and pave the way for beating scale. So.
Cement and fixes immunology research using elastic search.
Continuous improvement and he is also occurring with all Howard.
We will finalize the higher performance as Jim you know on April.
And indeed, a pool completing qualification in the second quarter of gifts kit and the year.
Just a low viewed as Jim and I was just that we take to market.
All Ottoman go in 2021 is when you go on from New customers Force you mean on one in all.
Searched categories.
Aerospace and defense.
Data and E commerce.
And the recovery.
And the facial recognition.
For the next generation Apu chip I'm Gonna tube, we anticipate finishing that P value in the second half of 2021, and placing all the MOSFET by year end.
And we pray and too long and stimulate cool in late calendar 2022 with older Book magazine per four months calls improvements on both Jeremy and I want.
Yeah.
The go to market timeline and speeds due to the COVID-19 containment.
But we continue to progress the technology and.
<unk> awareness.
And the team has a dominant Austin and job.
And then from there.
And I greatly appreciate their hard work.
I want to thank you all favorable shifts as shareholder for your continued support.
Now I hand, the call over to Didier who.
We will discuss the pulp business and performance you further details.
Please go ahead.
Thank you Leanne.
Lee just explained and addition to a novel architecture Apu is a strong software offering GSI.
GSI software expertise combined with the high performance Apu hardware solution is a competitive advantage versus asos and AI solutions that are typically siloed and either software or hardware.
We plan to offer the compiler and the libraries with the device and depending on the application. We may also sell the API and the algorithms.
Our software allows us to improve device performance for various applications without altering the hardware.
As a reminder, our software offerings include one applications, which are integrations for specific market applications like <unk> for drug discovery and facial recognition image processing and hash cat for password recovery.
Two machine.
Machine learning algorithms, which allows users to develop neural network algorithms to enhance apu applications.
Three eight.
Is what's your application application interfaces for specific application acceleration by developers.
And then lastly, our.
And our compiler stack, which is the stack for algorithm conversion framework support and simplified low level cogeneration.
First compiler stack will focus on Python.
Shifting to the sales breakdown for the third quarter of fiscal 'twenty and 'twenty, one sales to Nokia were $2 8 million or 42% of net revenues compared to $2 6 million or $26 three per cent of revenues and the same period a year ago and.
And $3 4 million or 51, 7% of net revenues and the prior quarter.
Military defense sales were 26% of third quarter shipments compared to 18, 9% of shipments and the comparable period, a year ago, and 26, 9% of shipments and the prior quarter.
Sigma quite sales were 62% of.
Third quarter shipments compared to 62% and the third quarter of fiscal 'twenty, and 'twenty and $65 four per cent and the prior quarter.
We were on sure I'm sorry, we are on share in 'twenty and 'twenty, one the business challenges related to COVID-19 restrictions when they will subside as a result.
We are not able to have the face to face meetings, which are critical to our military and defense sales for the radiation hardened SRAM and.
In addition, we are not able to offer a highly predictive in house training workshops, which slows the pace of the sales process for Gemini that said, we are seeing progress with our target customers and are looking forward to allowing remote access to our Apu datacenters for customer testing.
I'd now like to hand, the call over to Doug Doug. Please go ahead. Thank you.
Yes.
We reported a net loss of $5 $2 million or 22 cents per diluted share on net revenues of $6 million from.
Third quarter fiscal 2021.
Compared to a net loss of forefront and $6 million or <unk> 20 per diluted share on that.
Revenue from $10 billion for the third quarter fiscal 'twenty and 'twenty.
And a net loss of $5 2 million or <unk> 22 cents per diluted share and net revenue of six $7 million from our second quarter and fiscal 'twenty to 'twenty one.
Gross margin was 47 per cent compared to 62% in the prior year period.
And 46, 7% and the preceding second quarter.
The change in gross margin per.
I'm really due to changes and product mix sold and a three periods.
Total operating expenses from the third quarter of fiscal 'twenty, 'twenty, one reported $3 million compared to $10 million and the third quarter of fiscal 'twenty and 'twenty and then.
$8 $3 million and the prior quarter.
Research and development expenses were five $7 million compared to $8 $2 million and the prior year period, and $5 $7 million from the prior quarter.
The increase in R&D expenses for the third quarter of fiscal 'twenty, and 'twenty reflected a charge of $2 $7 million for purchased and intellectual property debt.
Being incorporated into a next generation of our chairman on ships.
Selling general and administrative expenses were $2 $6 million and our quarter ended December 31, 2020, compared to $2 $6 million and the prior year quarter and towards $2.6 million from the previous quarter.
Third quarter fiscal 2021 operating loss was $5 $2 million.
Compared to $4 $7 million from the prior year period.
And an operating loss of $5 $2 million and the prior quarter.
Third quarter fiscal 'twenty and 'twenty, one and net loss included interest and other income of $25000 and.
The tax provision of $90000.
$207000 from interest and other income and cash provision of $84000 from the same period a year ago.
And the preceding second quarter net loss included interest and other expense net was $16000 and attach provision from $62000.
Okay.
Total third quarter pretax stock based compensation expense was $693 $693000 compared to $629000 and the comparable quarter, a year ago at $653000 and the prior quarter.
At December 31st 2020, the company had 52 per $3 million and cash cash equivalents, and short term and restaurants, and temporary $1 billion and marketer and investments.
Share to $66 6 million and cash cash equivalents and short term investments and forthright and $1 billion and long term and restaurants at March 31 2020.
Working capital was $54 4 million as of December 31st 2020 versus 70.9 billion at March 31st toward 'twenty with no debt.
Stockholders' equity as of December 31, 'twenty, and 'twenty with $78 5 million and purchase compared to $89 6 million.
As the fiscal year ended March 31 2020.
Yes.
For the upcoming fourth quarter of fiscal year 'twenty to 'twenty one.
Current expectations are net revenues and a range of $6 8 million to $7 million with gross margin of approximately 48% to 50 per cent.
Operator at this point and we will open the call to Q&A.
Thank you if you would like to signal and whats questions. Please press star one on your Touchtone telephone if you're joining us today use a speaker phone. Please make sure new function is turned off to allow your signal to reach our equipment.
And once again that is star one if you would like to ask questions and getting a star one if you would like to ask questions.
Our first question will come from Kurt carbon index with Carl M. Hennig.
Hey, guys.
Are you still on markdown on or have you recently reopened after inauguration.
And California to know do you still are we still a work from home.
Philadelphia on the extremes yeah.
Yeah, I'll go out and throw some of them and the audio.
And so summer.
Oh yeah.
And otherwise.
Here I'm sure surprised if we didn't come back to work until close from summer time, but I think everyone and this is.
Working from pretty efficiently.
Jim and I to design is progressing on.
Our cost per year end audit and and several quarter on reduce without even seeing joggers. So it works and it's not sufficient but if it does work.
Well first of all as I guess its still going on.
And it's still a problem and through the summer I was just curious when that line and then official recognition has that been banned yeah. What's the current status of and I know that was a big part of things and then there was companies getting all day on what the government's position now is if they wanted to stop that or what can and favorable facial recognition.
And now.
So we're still moving ahead with it because again, there's many sectors and the facial recognition.
Some of the folks that we've been talking to folks the potential customers.
And they're in niche markets and or facial recognition.
One of them was working on facial recognition for things like conferences.
And for things like and <unk>.
During arena like football arenas. So there are a lot of different segments that fall on her facial recognition and so.
And I haven't heard of any band and we're certainly moving forward under those types of niche applications.
Okay, and then are we looking at you think 12 to 18 months before we would see revenue from one and then obviously later than that on two.
Oh, you're talking Joe and I Wanna, Jim and I do yeah, Yeah, So Jim and I won.
And we'll see some certainly and the first half of this year, we will see you know.
Some some demo boards being purchased still.
And the first half debt.
And that clear again were still on the design and phase at this point, so it's not clear what.
Volume will see and the second half of this year, yet too early for us to project.
As far as Jim and I to it's gonna be it's gonna be a while right as Lee Lean mentioned, we will see a tape out and earliest at the end of this year, which means we will see first silicon sometime end of and the kind of first second quarter calendar quarter, I should say F. 'twenty and 'twenty two and then you know theres a debug process.
I don't see us having a fully functional apart on that until sometime in 'twenty and 'twenty three.
Yeah now is the 600 megahertz.
Didn't see a mention of that but are you working on it was that gonna be from 406 hundred or is it getting worse than that or it might be on them yet.
So we are still moving forward and Youll see it go and no new silicon and these are much improved both input from them and.
And their functionality and also the manufacturer to yield so are we going to take destocking through the production and.
We saw where do you what Lee doubled.
Okay, great. So on and final thing and I'm seeing a lot of shortages and silicon.
Price increases on a chips what effect does that if any have on.
You guys and that it just seems like everything is tight right now.
Youre correct everything is tight and so we we actually did see some of the tightness late last year already and we're able to address some of it as you mentioned some of our costs have gone up and certainly the lead times have gone out and.
And so you know we plan accordingly, so we've put in some material and so far you know it is.
It affected some revenue, but as you can see by this last quarter and the quarter. We've just guided to where we're still managing to grow slightly and as far as the price increase and we are going through that process. Now. Unfortunately, you know with our costs going up and we have to also increase our b cell to the customers and so that's happening now.
And <unk>.
Okay, great. Thanks, guys.
Thanks Kurt.
Thank you once again and if you would like to signal with questions. Please press star one and Touchtone telephone.
And again as star one if you would like to ask questions. We will pause for just a moment.
Again star one if you would like to ask questions.
And that does conclude the question and answer session. Mr. Hu I'll now turn the conference back over to you for any additional or closing remarks.
Thank you all for joining us today, and we look forward to speaking with you, Okay, and where do you pull on fourth quarter physical 2021 and resolved. Thank you.
Thank you that does conclude today's conference. We do thank you for your participation have and excellent game.
Yeah.
Yeah.