Q1 2022 GSI Technology Inc Earnings Call

Ladies and gentlemen, you were currently standing by for todays GSI Technology's first quarter fiscal 2022 results conference call. At this time, we are still of many additional participants and plan to be underway. Shortly we do appreciate your patience and please remain on the line.

[music].

Good day, ladies and gentlemen, and thank you for standing by welcome to GSI Technology's first quarter of fiscal 2020.2.

2 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 line, we will provide instructions for those interested in entering the queue for the Q&A before we begin today's call. The company has requested that I read the following safe Harbor statement the matters discussed.

And 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 July 29th 2021 at the request of GSI technology hosting the call today is Leland shoe the Companys Chairman President and Chief Executive Officer with him are Douglas Shirley Chief Financial Officer.

And with their vice President of sales I would now like to turn the conference over to Mr. Hu. Please go ahead Sir.

Good afternoon, everyone and thank you for joining us to review our fourth quarter 2022 financial results.

Fourth quarter revenue improved year over year.

And so.

Sequentially due to higher sales to Nokia or largest comes from them.

The increase demand for all Sigmar coal cargos, which improved gross margin and narrow.

Our operating loss.

We ended the quarter with over $55 million.

Sure.

This is more than sufficient funds to achieve all goes or prudent stocks the school president for the.

New products.

The net revenue from our legacy business.

The new to support audio product categories.

From a radiation, Colorado and devices.

And the chairman of <unk> solutions.

Sure of course of radiation tolerant of devices in the first quarter.

The increase albeit of customer engagements, both Jimmy and 1 system.

All of effort to fuel market recognition of this.

The call are critical yield of several promising.

And the first quarter.

First we named first place even the Mafia challenge.

First the open the door, which is already a prime contractor with whom we successfully demonstrated chairman and as the overall value proposition.

For synthetic aperture F.

<unk> radar.

Uh huh.

Issues, leading to a proof of concept and engagement for source systems.

Second the.

Partnership with Bruce Michael for the.

The first 1 loss of our small business immigration of abuses.

All forward growth.

And that's gotten underway.

The 2 for me the first 2 proposal to the Bill of 2 more real time, and there's a certain interest.

Process of unit pool.

For the organization's mission Bay the TCU.

And the.

The third in the first quarter, we shoot of.

All force radiation Torrance because of the devices.

Essential stayed stable.

Getting space.

For all of radiation hardened and total room devices.

Video will provide detail of more focus and you show, a pretty subdued and engagements and Houston.

Remarks coupons.

Yeah.

And last week AWS.

<unk> open search 1 zero the first production ready versions of often Serge.

<unk> debt AWS.

First introduced in April 2021 the.

The open search project is the community.

Some of them open source and.

<unk> suite.

The life from open source you lost your search and the.

The coupon on them.

Your last piece of your last piece of data visualization visual software.

Since the spring we have been working with AWS.

All of this project.

To demonstrate and TSS.

The <unk> search K and parking.

You asked the search was initially designed of tech tax and the document search engine the <unk>.

Terminate urology surgery, and parking or extension expense urology surgery ability too.

Would you be I'm just texts.

The parking opens the door to other debt archive like image.

Do you all do you.

And he did a perhaps the can be represented most of the compact Simethicone Beach.

The medical back too.

Factors.

The sales to search for the most similar items or the us enable us to liquidity.

They can a seller of multiple applications such as the visual search.

Chris the recognitions natural language processing.

And the recommendation systems.

Our extension of high.

It can be low latency low power reading skills, they cooked and all.

All of the research solution that allows user to combine traditional exotic.

Text fuses with breakfast of.

Recent clicks of search queries.

Here's the problem we solve.

Cool.

I'll just sort of use of match all the functionality.

And it makes the too slow to handle the large scale of initial retrieval stuff.

Isn't the big test them and onto your search pipeline.

The Miss.

Call you lots of your search to scoring.

And there's 1 other small futile.

Victor.

You're still using of your stock's cheap match all search the GSI parking.

And approximate the U S labor, Okay and.

Victoza and been honestly the Soc.

This allowed the GSI countries to skill to billions of documents and.

And the handle the issue of initial and retrieval step.

Search pipeline.

Marty model search where image and text can combine to form a powerful search is.

And the rapidly emerging trend.

In line fashion and the home design used multi months multi model search because they really heavily on.

Visual search since style is often difficult to describe using tex.

In addition to video search and text search is also required because of production product information like items description category and brand is generally used to fill the the returned the resolve.

Part of the video.

In the.

The solution allows for multimodal search use the D D.

And so search libraries do not kind of multimodal social will the popular open source vector of social library.

Such as face and and.

And as the library.

At the day.

Labor back to search for lack of support for efficient data filtering.

For example, you could be T V coface the.

The use of picture of users to few of the resolve previously you'd return from the U S labor fixes the.

GSI softest problems, which is the largest search parking.

And by allowing the marquee model Soc to be performed efficiently and effectively.

All of extension and put by of high performance low latency and low power solution that combines traditional your doctor search.

Fixed futures with Victor social clues.

Solving the imaging and.

Text search problem.

And our solution is compelling because of we do quite a few of the resource for a bit of Ark.

After successfully proving that the chairman of the Apu significantly of sale with vector search performance.

Amazon The open search service included GSI.

1 of the service partner.

In the project.

AWS recently reduced version 1.0 of open search for users of elastic search and developer.

Building products and service based off of <unk> research.

AWS has select partner.

And both of the softwood.

And if tension the support open search in various applications like all of you lost your Soc and parking the E P.

And as Iraqi searches ability to search beyond just the text we.

We are excited to be of part of this team.

We are in the early stage.

Stage of developing this the opportunity and we still have a lot of work to do we.

We still need to finalize the business of motto.

And the setting of the data center Silicon Valley.

With the Jimmy and I, If you survey in the GSI call.

To connect to the AWS data center do you buy.

What's the setup is a complete and so.

Successful it demonstrated we cannot we stole most of us and gateways of users by year end.

Hey, if all goes to the we'll open it up to all customers even carried into 2022.

Long term, we met you start Jimmy and I, if you use of us.

And the data centers in many locations around the world.

The first quarter has it been pushed back from.

The active for GSI my team here in the California.

And with all kinds of Israel.

And Taiwan Oh.

And how do you committed to our goal of lending customers.

And beauty successful business for all of radiation tolerant devices and the.

Jimmy the Apu.

We are progressing and the remain optimistic.

And that will be successful in executing our long term strategy.

I sincerely. Thank you for your support of the federal GSI shareholders.

Now of hindered and the call over to Didier who will discuss of our business performance in further detail.

Please go ahead D D.

Thank you lean I would like to provide and update on 2 product categories are radiation tolerant or Rad tolerant chip, that's shipped and the June quarter, and our progress on the Apu.

And government projects.

Last quarter, we shipped our first Rad tolerant SRAM 4 and initial satellite flight expected to occur at the end of this calendar year.

If the initial fly successful the larger satellite constellation and build is expected to start later in calendar 2022.

We now anticipate a.

And your satellite project that will use the same class of Rad tolerant SRAM.

This is a substantial opportunity for us and also brings the key benefit of establishing heritage for Rad hard and Rad tolerant S ramps and space.

We anticipate that having heritage will be of growth catalysts for this product category.

The comparative <unk> gears to the Apu as we previously announced we partnered with space micro for Phase 1 NASA Spi our program.

We believe this project can serve as a catalyst for Apu sales and this sector.

And this project the AP will function as the main engine and for a single board computer in space.

<unk>.

Which for this project is being referenced as and IP you or in and.

Inference processing unit.

Phase 1 is officially underway after the initial kickoff meeting and it is expected to be completed before year end the.

The next step is to submit our phase II proposal, which will probably happen and.

And early calendar 2022.

This is an exciting opportunity to put apu and the hands of multiple government agencies and prime contractors for space applications.

Lastly, and other exciting Apu development is the outcome of winning the MOSFET challenge at the end of last year.

Since then and my fat has gotten.

CSI and the team has had the opportunity to work on our Apu with MOSFET to demonstrate the scope of functionality of the device.

Notably we have demonstrated the apu's capability to perform SAR operations that our Apu functionality exceeds that of the CPU and the GPU by the fact.

And in some cases of 100 times, better, including lower power and lower overall system cost.

As a result, we are now working with and Israeli defense Prime contractor to deliver proof of concept servers to perform SAR operations.

We expect to deliver the servers and early calendar 2000.

And 22.

If the effort of successful we hope to leverage the success and to other projects.

Shifting to the sales breakdown for the first quarter of fiscal 2020.2 sales to Nokia were $3.8 million or 42, 7% of net revenues compared to $1.8 million or 26.9.

Factor of net revenues and they seem period, a year ago, and $2.8 million or 36, 5% of net revenues and the prior quarter.

First quarter of fiscal 2022 net revenues.

<unk> orders for buffer stock shipped to Nokia and mounting and approximately.

The $1.1.

9% that were made and anticipation of continued market tightness.

Military defense sales were 21% of first quarter shipments compared to 31% of shipments and the comparable period, a year ago, and 22, 5% of shipments and the prior quarter.

Super quiet sales.

We're 63, 6% of first quarter shipments compared of $46.3 and the first quarter of fiscal 2020, 1 and $52.9 in the prior quarter.

And now I'd like to hand, the call over to Doug go ahead, Doug. Thank.

Thank you D D day with.

We reported a net loss of $4.2 million.

Or <unk> 17 per diluted share and never.

Revenues of $8.

$8 million for the first quarter of fiscal 2022.

Compared to a net loss of $6.1 million or 26 cents per diluted share and.

Net revenues of $6.6 million for the first quarter fiscal 2021.

And the net loss of 5 million.

For 'twenty, 1 cents per diluted share and net.

Our revenues of $7.7 million for the fourth quarter of fiscal 2020.1.

Gross margin was 54, 4% compared to 46, 1% as the prior year period, and 52% and the preceding fourth quarter and.

Proven and gross margin was primarily due to changes and product.

<unk> sold and the quarter, which reflects an increase and higher margin Sigma pod sales as compared to the prior periods.

Total operating expenses and the first quarter of fiscal 2020 true for $9.1 million compared to $8.7 million and the first quarter of fiscal 2020, 1 and $9.1 million from the prior quarter.

Search and.

<unk> expenses were $6.1 billion.

The $5 million from the prior year period, and $6.1 billion and the prior quarter.

Selling general and administrative expenses were $3 million.

And the second quarter ended June 30 of 2021.

Part of $2.9 million from the prior year quarter and 3 million.

And the previous quarter.

The first quarter fiscal 2020, 2 operating loss was $4.4 million compared to $5.7 million from the prior year period.

And $5.3 million from the prior quarter.

First quarter fiscal 2022, net loss was $4.2 million.

Compared to a net loss.

Of $6.1 billion from the first quarter of fiscal 'twenty 'twenty 1.

And $5 billion and the fourth quarter of fiscal 2021.

First quarter fiscal 2022 net loss included interest and other expense of $20000 and.

And the tax benefit of $172000.

Compared to interest and the other income of 106.

Of course.

And the tax provision of $487000 from the prior year.

Primarily resulting from the settlement of a tax audit in Israel and the fiscal years 2017 through 2019.

And the preceding fourth quarter net loss included interest and other expense of $21000 and.

And the tax benefit of 304000.

<unk> thousand dollars.

Total first quarter pretax stock based compensation expense was $823000 compared to 753, $755000, the comparable quarter, a year ago and $753000 from the prior quarter.

At June 32000.

The company had $51.5 million of cash cash equivalents and short term investments and.

And for $3 million and long term investments.

Share to $54 million of cash cash equivalents and short term investments and <unk>.

And $5.8 million and long term investments at March 31, 2021.

And 21 capital was $54.8 million as of June 30 of 2021 versus 56 million at March 31, 2021 with no debt.

As of June 30, 2021 stockholders' equity was $73 million compared to $75.6 million as of the fiscal year ended March 31.

'twenty 'twenty 1.

And the upcoming second quarter fiscal year, 2020.2.

Current expectations of our net revenues and the range of $6.9 million to $7.9 million.

With gross margin of approximately 51 per cent to 53 per cent.

Supply chain shortages and the impact of rising.

Covid infections, and twine and Taiwan that of recently impacted the operations of our manufacturing partners are expected to impact our fulfillment of the sales in the near term and possibly for the range of of calendar here.

Operator at this point, we will open the call to Q&A.

Yeah.

Thank you if you'd like to ask the question.

Please press star followed by the number 1 and your telephone keypad, if you're calling from a speaker phone. Please make sure. Your mute function is off to ensure your signal to reach our equipment again star 1 to ask a question first of all go to Jeff Bernstein from Cowen Your line is open.

Hi, guys. So I just wanted to make sure I.

Understood.

And the news with regard to the AWS open search partnership.

So just correct me, where I'm wrong, if I haven't understood.

So AWS is offering and open source search capability.

And.

And facilities and without your product and software and extensions to to use the the Apu.

And that open source search capability was pretty limited.

And I think you said you were bringing the capability to do a lot more things and add the efficiency.

And they're both power efficiency and speed of.

Of the Apu.

I've got that right where are these apu's going to run your software extensions, they're going to run in the Amazon cloud and be a facility for people to use or are people going to pre process and the Amazon cloud.

And then by AAP used from you.

And to run search on their premises or how does all of this work and and most specifically how does this relationship convert to Apu sales and revenue for you.

Yes.

Use of <unk>.

On the call.

And there were few laggards.

C and call.

But the witness the well.

And this and the request to the M of them.

The clue of thin to GSI call.

And then we will return the resolved back to Amazon.

And the so so.

And so far you of the hauling the veolia over in the.

And with an email and then.

We do simulation.

We provide the.

The search function to it.

IC, so and so in this case you will be offering a service where you build your own GPU Im sorry, your own Apu cloud with the Gemini Apu.

And then you use that to accelerate and also expand the capabilities of search that would've been done.

And the AWS.

Open source search.

Yes, the permit.

Yes, you've got it.

So so in in the in the the.

The pause.

Positive of this is that Amazon is becoming very aware of what your capabilities are.

As a result of this or at least part of Amazon is.

And customers, who want to use this facility may help you build.

Standalone business of your own in providing.

And the accelerated cloud a little like how some of the the like IBM is trying to do with quantum.

Yes.

Absolutely right. We are in the meantime, we are.

We are discussing and the walk in with the overall, although the company you know the Victoza, which sauce.

And so you will see just like Amazon and we are working on it and hopefully you and me.

He was the first 1 and then and.

And the open it off you know for the much bigger piece of the slowest.

Understood. Thank you.

And again thank.

If you have a question. Please press star followed by the number 1 and your telephone keypad I'll pause for just a moment to give everyone a chance the signal.

And we have no further questions in the queue.

Thank you all for joining US we look forward to speaking with you, Okay and when we report our second quarter of physical 2000 total result.

Thank you.

Yes.

And.

And that does conclude our call for today. Thank you for your participation you may now disconnect.

Okay.

[music].