Q4 2021 GSI Technology Inc Earnings Call
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You're holding for the GSI Technology, Inc. Conference call. We are still of many additional participants on the costs you begin shortly will do thank you for your patience and please continue to standby.
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Ladies and gentlemen, thank you for standing by welcome to the GSI Technology's fourth quarter and fiscal year 2021 results conference call. At 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 interest interested in entering the queue for Q&A.
Before we begin today's call. The company has requested that I read the following safety of 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.
The really from those anticipated the.
These risks and uncertainties are described in the company's forms 10-Q, and 10-K filed with the Securities and Exchange Commission. Many of these risks are currently amplified by and will continue to be amplified by or in the future may be amplified by the COVID-19 global pandemic. Additionally, I had been at.
Asked to advise you that this conference call is being recorded today may six 2021 at the request of GSI technology hosting the call today is Leland shoe the company's chairman President and Chief Executive Officer with him are Douglas Shirley Chief Financial Officer, and Didier Lee sure Vice President of itself.
I would now like to turn the conference over to Mr. Hu. Please go ahead Sir.
Rob the Luke and thank you for joining us today to review, our fourth quarter and fiscal year two.
Southern countries of unresolved.
I will cover some highlights from the year.
The.
Omar if you plot of.
Followed by BDO Das there was comments on product and the sales breakdown of.
Of the war of.
Kerry will review in detail, all fourth quarter and full year of physical 2021.
Okay.
Yes.
Physical year 2000 ton you on raw several unforeseen challenges to our business.
We face a global pandemic and slowing sales from <unk>.
<unk> customer.
With that said.
We stay focused on all key objective of.
Bringing Jimmy <unk> to market.
Increasing the awareness of our groundbreaking technology.
We made good progress on both of them pretty strongly.
Despite the challenge.
The Kobe over the past the year.
We launched the mall.
Based on data centers Israel.
On the U S customers to test them on give me that one.
The Gemini Apu ease the do you see more media coverage highlighting the unique advantage.
Chris.
We have also received third party validation of.
Jimmy line for certain applications.
Including all of elastic search profit could.
Could you Dear.
I'll discuss the section.
Including the.
The system part of the problem.
The escape the highest.
Tightened the attention.
Several of leading semiconductor companies have.
Recently introduced products.
The output tissue the first solution to eliminate system bottleneck.
The system.
Clark, who is the volume on the bottleneck.
Caused by the supply of memory and the CPU in the volume of.
Of the picture.
The from Newmont architecture, New class of the CPU to fetch data for every acre of issued Europe.
<unk>.
We don't believe that any of the new solutions address the actual problem the AUM.
On the way to truly eliminate the bottleneck is to break the procurement model.
As of hard the Jimmy the IP with us.
Would you move the limitation of the volume.
Newmont architecture.
We used the Jeremy Apu with greater volume of model and also a new architecture.
The process of in the memory.
Good day, we are working on numerous applications with all of our customers.
And the demonstrating revolutionary architecture can.
Can reduce latency.
Reduce power consumption and all of our scalable receivable solutions.
When we look at the true.
The favorite Gemini and the Apu architecture.
<unk>.
And the growing awareness of the kinds of beauty will be of significant trend been favorable.
USG and the power consumption.
<unk> topical on the reader in the press.
In the boardroom.
With the Investor.
In April growth in data center.
AI and big data rapidly in creating power consumption.
He has a heightened focus on funding of beta solution for you.
The last call.
The chairman of <unk>.
The amount of trade.
I think the deduction lean power consumption.
For critical applications in search.
One exciting example is from our aerospace and defense of workshop.
We show the February.
We compared the synthetic aperture radar both saw.
Immediate surge of similar.
Similar area.
<unk> resolution and tons.
Looking at the operating power cost of over five years, the gym EU use of 93% less power on average Inc.
Can be installed in the small.
<unk> silver cabinet.
Is the significant reduction from the CPU or GPU based solution.
Additionally, this solution much greater how the investment.
Jim and I along with the.
The <unk> low power consumption.
The lowest the overall system cost plus with the.
<unk> total cost of ownership.
Sure.
Another compelling comparison.
Is traditional facial recognition systems that use of the <unk> silver with the CPU and GPU to search data.
Certain feature of Victor tool effect on core CPU and memory from.
Here the trend the model first.
And the final rig on <unk> in the GPU and the magic is identified.
We used the Gemini Apu this process of simplified.
We are in the Gemini Apu is stalled along with the CPU or GPU.
Search take price on the chairman of the Apu.
And eliminate.
Radian, sending data to the call and the match user from more rapidly.
This means fewer CPU and GPU.
And the SMC it.
As the reduce it.
Again this call of issues.
On previous calls I have highlighted all of software capability.
We have a finalized give me that one with the little for.
From a mass production.
We are on track to begin qualifications through the.
The software team at GSI.
On the trading their capability in numerous applications.
And are always finding new ways to improve our offering.
All capabilities.
All of our technology, we're made of different U haul searches from.
Right.
Black with elastic search.
Using the <unk>.
Serge.
We are working with the very large database.
Such as low as the <unk> scale entries and above.
Because cash is.
It's the compute.
It has been challenging to use it.
The search due to the constant concern of moving the database between GPU or CPU cores.
With the Apu, the storage or yourself become the processor.
Stay off of modestly or processing coal with cash from them would be close by the Apu is differentiated by performing the processing in the memory already directly.
The convergence of.
Okay.
Obviously search Cana and the <unk> solution.
The less Ecu lesser latency more queries per second and reduce the power.
Based on this very exciting.
We're engaging with potential customers in the staff Victor search space, who are recognizing the strength of <unk> technology.
Overall this was the year of suppliers.
And we lost through the challenge.
The <unk> business in many ways.
But we are continually advancing our technology and bringing the Gemini Apu put awards of attention.
Good day GSI is the 190 <unk> engineered.
Worldwide.
We have received over 100 U S patent with 51 of them for the Apu.
I am grateful for all of our employees the commitment to delivering excellence in product service and support during this challenging time.
Along with the matching we are bringing all of the evolutionary solution to our existing customers. The solution is low.
Of the opening many of those with.
With the potential new customers.
Lots of excitement about our progress on Timna.
At GSI.
All of ethylene products continue to be essential for military and defense.
In the telecommunications and the networking customers.
Doug will comment on all the critical.
The outlook in his prepared remarks.
I will now turn the call over to <unk>, who will highlight the sales and marketing progress on which immuno on and review of our business segment performance.
Chris go ahead of BD. Thank you Lee lean I would like to touch on two things in my comments. The third party validation of the GSI plug in for elastic search and the recently announced phase one contract with NASA.
First a little background on elastic search for those are familiar with the name of elastic search is the most popular search engine.
The last six or so popular is that one is open source and free software and number two the way its stores documents with search of all references that allow them to be searched and retrieved and enables visit visualization tools for visual search.
Very flexible and highly functional elastic search has become the go to search solution for scalable real time search.
Recently of third party tested our elastic search plug in powered by the Gemini Apu, which demonstrated the fastest from vector query speed on a 1 million items search compared to further methods.
At $92 six milliseconds, the Gemini Apu was 82% faster than the next fastest solution and showed a 94% improvement from the slowest response solution.
They also noted that unlike other methods, Jim and I supported batch queries the.
Our impressive performance results and it's great to see them published by the independent Party.
Switching to the NASA contract, we issued a press release earlier this month announced excuse me of announcing that we were awarded along with prime contractor space Micro a phase one contract to develop a real time sorting inference processing unit also known as an Apu.
And <unk> board for Earth observation missions.
The board will feature a radiation tolerant Gemini Apu, which is the predominant force behind the IP you for satellite applications.
Using inference, rather than search gives the broadest potential scope for the NASA project, which is why they release.
References as an Apu I'm sorry ICU.
This phase one contract is the first key step.
Clifford aiding Gemini and space by giving us access to the mission. The goal of phase one is to optimize the product portfolio and demonstrate the usability of the hardware across multiple platforms for as many possible applications.
The phase one is typically a six month process.
We are also very excited that the board will be used will be using a radiation tolerant chip.
Once we have optimized the portfolio, we hope to move to phase III, we will receive NR refunds to cover design and qualification.
We estimate 18 to 24 months of testing and qualification before we begin to ship the product.
On a different note I am pleased to report that earlier. This week, we received the purchase order for a rad tolerant SRAM product the <unk>.
Oh is four of demonstration satellites anticipated to be launched this year late this year or early next year Ulta.
Ultimately it is for a satellite constellation.
We hope to be able to say more in the coming quarters.
Shifting to our sales breakdown for the fourth quarter of fiscal 2021 sales to Nokia were $2 8 million or 36, 5% of net revenues compared to $2 4 million or 28, 3% of net revenues in the same period a year ago.
$2 8 million or 42% of net revenues in the prior quarter.
Nokia sales have been slowly improving in the past two quarters, and we expect business with Nokia to stabilize this year.
Military and defense sales were 22, 5% of fourth quarter shipments compared to 39% of year ago and 26% in the prior quarter.
Taking the quad continues to be our best performing product category with sales of 52, 9% of fourth quarter shipments compared to 44, 7% in the fourth quarter of last year.
62% in the preceding third quarter.
I would now like to hand, the call over to Doug.
Please go ahead, Doug Thank you Didier.
For the fiscal year ended March 31, 2021, we.
We reported a net loss of $21 5 million or of 91 per diluted share on.
Net revenue of $27 7 million.
The net loss of $10 3 million of 45 per diluted share.
Our net revenues of $43 3 million from the fiscal year ended March 31 2020.
Gross margin for fiscal 2021 was 47, 7% compared to 58, 5% in the prior year.
Total operating expenses were $34 5 million in fiscal 2021.
The decrease of four 6% from $36 1 million in fiscal 2020.
Research and development expenses were $23 3 billion.
Compared to $25 2 million from the prior fiscal year and selling general and administrative expenses were $11 1 million compared to $10 9 million in fiscal 2020.
The decrease in research and development expense.
It was primarily due to the charge of $2 7 billion.
During the third quarter of fiscal 2020 for purchase of intellectual property that.
That is being incorporated into our next generation of Gemini chips.
Fiscal 2020.
From an operating loss was $21 3 million.
Compared to the operating loss of $10 8 million from the prior year.
The increase from the operating loss is primarily due to the decrease in revenue and gross profit.
Fiscal 2021 net loss included interest and other income from $94000 and a tax provision of $335000.
Compared to 712000 net of interest and other income and the.
Cash provision of $247000 a year ago.
The company reported a net loss of 5 million or <unk> 21 per day.
Diluted share on net revenues of $7 7 million for the fourth quarter of fiscal 2021.
Compared to a net loss of $3 8 million or <unk> 16 per diluted share.
Net revenues of $8 5 million for the fourth quarter of fiscal 2020.
The net loss of $5 2 million or <unk> 22 cents per diluted share of.
The net revenues of $6 8 million from the third quarter of fiscal 2021.
Gross margin was 52%.
<unk> to 52, 5% from the prior year period, and 47, 3% in the pursuit.
Preceding third quarter the <unk>.
Change in gross margin was primarily due to changes from the mix of products sold and the.
The negative impact of manufacturing overhead and reduced revenues.
Total up.
Operating expenses in the fourth quarter of fiscal 2021 for $9 1 million compared.
Compared to $8 4 million in the fourth quarter of fiscal 2020, and midpoint of $3 million on the prior quarter.
Research and development expenses were $6 1 million.
Compared to $5 6 million from the prior year period.
The $5 7 million from the prior quarter.
Selling general and administrative expenses were $3 million.
In the quarter ended March 31, 2021, compared to $2 8 million from the.
Prior year quarter, and $2 $6 million from the previous quarter.
Fourth quarter fiscal 2021 operating loss was $5 two.
Compared to the operating loss of $3 $9 million from the prior year period.
And an operating loss of $5 2 million from the prior quarter.
The fourth quarter fiscal 2021 net loss included interest and other expense of $21000.
On the tax benefit of $304000.
Compared to $148000 from interest and other income and the.
Cash provision of $65000 for the same period a year ago.
In the preceding third quarter net loss included interest and other income of <unk>.
$25000 and the cash provision of $90000.
Total fourth quarter pretax stock based compensation expense was $753 $753000.
$644000 from the comparable quarter a year ago.
$693000 in the prior quarter.
At March 31, 2021, we had $54 million in cash cash equivalents and short term interest.
What's the.
The $5 $8 million on long term investments.
Compared to $66 6 million of cash cash equivalents.
And short term investments of $4 1 billion.
The long term investments at March 31 of 2020.
Working capital was $56 million at March 31, 2021.
Care to $70 9 million at March 31, 2020 rate with no debt.
Stockholders' equity as of March 31, 2021 was 35 6 million compared to 89 $6 million because of the fiscal year ended March 31 2020.
Fourth quarter net revenues and gross margin.
On the range of guidance provided in our last earnings release for net revenue in the range of $6 8 million to $7 8 million.
With gross margin above the range of approximately 48% to 52%.
Our current expectations for the coming quarter on.
The net revenues in the range of $8 1 million to $9 $1 million.
With gross margin of approximately 54% to 56%.
Our board of directors has authorized us to repurchase at management's discretion.
The <unk> of our common stock.
Under the repurchase program, we may repurchase shares from time to time on.
On the open market from private transactions.
Specific timing and amount of the repurchases will be dependent on market.
Market conditions.
Security law limitations and other factors.
The repurchase program, maybe suspended or terminated at anytime without prior notice.
To date, we have repurchased a total of $12 million 4779 shares.
Including $3 8 million shares acquired for purchase.
The purchase price of $6 50 per share under Dutch under a modified Dutch auction self tender offer completed in August 2014.
Our repurchases have been at average cost of $5 <unk>.
For sure for total cost of $60 $7 million.
Paired to net proceeds of approximately $30 million.
In our IPO in March 2007.
The March 31 2021.
Management was authorized to repurchase additional shares of our common stock.
With the value of up to $4 $3 million on.
Under the repurchase program.
We of continuous continuously active programs to repurchase shares.
But our repurchase price has been too low to purchase shares.
Given the uncertainty in the economy rising manufacturing prices.
Of the uncertainty of on Gemini Apu and Rad hard tailored products will generate significant revenues were on a cash conservation mode.
Operator at this point, we will open the call to Q&A.
Thank you.
I would like the signal on what the questions. Please press star one on your Touchtone telephone.
Joining us today using speaker phone. Please make sure your mute function is turned off to allow your signal to reach our equipment.
Again that is star one if you would like the signal with questions.
Our first question will come from tore harmonic.
The call meaning.
Thank you.
On.
Question is the is the naphtha when are we counting that as the chairman of the women I thought it was mainly for red.
<unk> tolerant of putting all youre, saying thats. The Gemini board is that kind of a double solution for that.
Correct. So it is the Gemini solution, but it will be a rad tolerant version of our Gemini Chip I think if you recall, it's been some time, but we did some of.
The radiation testing on the Jim and I, it's been about a year and a half.
And the results came back very very promising and so we certainly took we took the testing beyond Rad tolerant. The short of Rad hard. So we feel very comfortable that the solution will work at Rad tolerant levels.
Okay. What is your level of confidence in design.
Win for Gemini, whether it's facial recognition at one point you were talking about the signaling and then some other things now, let's say for calendar 'twenty. One is there anything close swarm hot.
Yeah. So.
As Lee lean spills.
Look about in his script, we certainly have a lot of customers, we're talking to a different market segments.
It's premature to say when some of those might hit is there a chance they could hit in calendar 2021, possibly.
Could it get pushed out hard to say.
Right now we're still in that design in phase so it's hard to predict when some revenues may occur.
Okay, and then maybe a bigger.
The question or.
If if youre not able to get design wins is there a path or a time, where you would maybe look to license partner on.
Or how do we view.
The.
We just keep going until you get something or is there some point, where you say immediately bring someone else into help sell it or what is the thought there.
As I mentioned earlier, we do have.
Plus opdivo.
Meeting with the customer.
A few comfortable right now.
And we will get some hopefully you will get some loans.
More concrete news along.
Along with the ones that we have of more.
Obviously the results.
Okay and in terms of.
The licensing we do total customer.
The worldwide for us to go through it all we do.
Definitely we will consider it but the.
But the Thunder from the.
On the marketing fill in the IP, we are not in venmo, okay, but the EBITDA has experienced the best area with the customer.
Customer growth.
I mentioned the worthwhile.
Welcome Lee.
Sure.
Okay, Doug I apologize I might've missed the did you extend or expand the buyback or then.
And I heard you say cash.
The conservation.
Can you restate that I apologize.
Yes, we still have $4 $3 million available to repurchase shares and we will be opportunistic with it.
Okay, So thats kind of unchanged.
Yes, yes.
Okay. Thanks, a lot.
Okay, Great I have one more question am I still on.
Sure.
Oh, the Red Herring per day have you reached heritage yet if you had any launches or is that still in weight.
So as we've talked about Rad hard is kind of a difficult area for us now because of the shutdowns as we recalled most if not all of the Rad hard opportunities or some kind of of national asset that require face to face meetings, which were unable to do right now.
On the Rad tolerant.
Let's conclude today's conference we do thank you for your participation have an excellent day.
Okay.