Q2 2022 GSI Technology Inc Earnings Call
[music].
Ladies and gentlemen, thank you for standing by and welcome to GSI Technology's second quarter fiscal 2022 results conference call.
At this time all participants are in a listen only mode.
Later, we will conduct a question and answer session. At this time, we will provide instructions for those interested in entering into it 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 in 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.
This conference call is being recorded today October 28, 2021 at the request of GSI technology.
Hosting the call today is Lee lean <unk>, the company's chairman President and Chief Executive Officer with him are Douglas Shirley Chief Financial Officer, and Didier less Shea Vice President of sales I would now like to turn the conference over to Mr. Hu. Please go ahead Sir.
Well afternoon, and thank you for joining us to review all physical second quarter 2022 financial results.
Our revenue increased by 17% year over year for the second quarter of physical 2022.
278 million.
Compared to $6.7 million in the second quarter, while physical 2021.
At the high end of the guidance whereby the earlier in the second quarter.
Through the first half or physical 2022 revenue is up 25% compared to physical 2021 and skills to look here at Rogers.
Customer.
Stabilized despite ongoing supply chain challenges they are covering all in those.
We reduced our net loss by 22% year over year. So that's what we saw over higher revenue and gross profit.
Only a modest increase in operating expenses.
Year to date basis.
Eight.
And we had to really $51 billion in cash cash equivalents and short term investments to support the launch of new products and sales and marketing effort to build a pipeline of opportunities.
Our legacy <unk> business.
Is it profitable.
And generate cash flow to support the development.
In language or broad radiation tolerant devices.
The Gemini Apu solutions.
We continue to have defense all key initiative.
We used the ongoing apu and radiation tolerant opportunities.
We are progressing in the current.
In the current customer engagements for both critical and have added a few.
Do pay their customer engagement for the Apu.
Okay.
We continue to.
Prioritize the allocation of capital.
Towards the Apu, who should we be D is central to the due to the long term value over the company given the unique opportunity for our novel technology.
We are committed to our strategic investment you're making to you.
To our own D C. Orlando is off market data we.
We estimate that the global 10 for Apu Associate application.
We used approximately $137 billion.
Later in the call.
<unk> will discuss our assumption and the <unk>.
Market represented to you to see.
In more detail our conviction regarding diesel strategic investment.
Yeah.
We were recently selected to be an organizer and judge for the bidding SKU approximate U S labor search challenge.
First of its kind competition in large scale approximate D S labor search O N S.
They've been it's been hosted Baidu Ips so its probably its annual conference.
Hello information processing systems.
GSI you said one of the members of our panel led by Microsoft that you can close a I thought leaders from industry and academia.
Participate participating teams submission.
Well be evaluated against challenging datasets containing at least 1 billion Victor Records.
The winning teams will be alongside <unk>.
<unk> 2021 conference in December.
Recent advances in a S techniques for search recommendation and drinking requests supporting a beating treating all large datasets.
This combination to help establish a consensus on push algorithms.
Effective at this scale.
S is so important to search retrieval and recommendation.
Challenge for a U S. Alcohol recent designers is to create a data structure that enables faster receivable over the Acadia is labor.
Even though the data set that up database size growth.
The trade off between accuracy.
Keep your quota is a recall.
And associate agency major typically us truthfully.
It's important to kidney failure and S performance.
Several implementations or for larger scale.
Yes.
I'll call it an enterprise grade mission critical and a weak skus search applications.
In these scenarios benchmarks such as the Cogs.
Pre processing time, and the power consumption becomes just that important surgical for subsidies as a trade off.
I have discussed on.
Costco's.
P use advantage in power consumption.
For our relationship with all of the top.
Two crypto miners, who long they own one Queen however, we all know the importance of acquiring power efficient hardware to low the pall deal.
Power is a big problem today.
But how much do we consumed two generating the power.
For all machines.
A couple of eye opening statistic.
Global data centers consumed an estimated 205 terawatt hours in 2018.
Or 1% of global electricity use.
The amount of energy used by data centers Davos approximated a before yes.
That data centers have the fastest growing carbon footprint of any area within the <unk> sector.
This problem will likely increase.
Rest of world growth become more data intensive and AI centric.
New highway and the chipsets, specifically designed for power efficiency will continue to be a major component of the designer of official data centers.
Solving this problem is longer strategic opportunities for our technology.
<unk> document.
Numerous applications. They all technology print enrollment policy, because all typical Cisco new quite a much smaller footprint, we lowered the overall total cost of ownership.
Two of the Ddos leader in the premium skew approximate yields.
Here's Serge.
Dr Search challenge competition well.
Participants great.
Additive to power usage, and how well costs.
Like with the other organizers and penalties GSA where have a submission.
To the competition.
Of course, we hope.
Tenured leadership outcome for submission and garner increased visibility with other competitors, including Nvidia Microsoft.
<unk> and <unk>.
Other leading <unk> printers.
We mentioned that Omar last call is that we are a partner in open social one zero luxury by AWS, we saw you'd actually search can pocket.
We are still in the early stage of developing this opportunity.
We have a functioning server in our Silicon Valley data Center.
We have had initial customer demand.
This time the release of the New open search two zero protocol has been delayed.
Pushing out the timing of our law law.
We expect Rx one of them will happen once the <unk> review.
Version of open search is to release.
It's all called open the office ADT to paid a customer in carried into 2022.
This quarter, we successfully raised the profile of GSI in the industry. We saw participation in the <unk> S. Competitions. We are moving forward with the opportunity to have far or recent success.
Higher competition with <unk> and.
And along Smith over the radiation tolerant lasso.
<unk> has been working tirelessly to raise our profile with the goal of leading customers.
Building the pipeline of business.
<unk>.
Thank you for your support was a failure with GSI shareholders.
Now I'll turn the call over to PD will discuss our operating performance further.
Go ahead Didier.
Thank you Leanne.
And instead, we have identified the market segments. We believe are most relevant to the Apu and defined our total available market or Tam and also our serviceable available market or Sam <unk>.
Starting with the total opportunity for the Apu search applications based on the available data, we estimate that the global Tam is $137 billion.
In 2021 and will grow at a CAGR of approximately 20% to $287 billion by 2025.
Our Sam.
$4 5 billion in 2021 growing to $10 billion by 2025.
The multiple search market segments. We include in our analysis include computer vision synthetic aperture radar drug discovery cyber security and service markets such as no SQL.
<unk> search and open search.
Which we plan to support with a SaaS solution.
These are markets, where we have currently have ongoing customer engagements.
Computer vision is a broad term that includes image and object recognition facial and body recognition warehouse robotics automatic target recognition and dense registration, which is aligning a photo image with the previous one which is beneficial for mapping.
These are all markets, where our chip is highly relevant.
Near term, we are engaged with opportunities and facial recognition object identification Saar and re identification. We identification is a sorting of faces are objects not in the database that allows us unknown object, we recognized and note any patterns related to where and when their image.
Captured.
With regards to the supply chain constraints facing our industry like many semiconductor companies, we face a one year lead time on substrates used in our chip Assembly.
And supply remains tight.
There was a fire at one of our substrate suppliers, but they are now back up to 70% capacity, which is helping.
In Taiwan, we had a subcontractor that shut down in June for four weeks due to COVID-19 outbreak in their factory.
Now 100% back in place.
Guarding the recently announced TSMC wafer price increases we are looking at 20% increase in wafer costs.
With the new prices, becoming effective for all new orders overall, the impact of increased assembly cost I'm, sorry Assembly labor costs rising substrate prices increase wafer cost and expedite charges. It means that we are we will be increasing our prices to all of our customers.
Moving to the sales breakdown for the second quarter of fiscal 2022 sales to Nokia were $1 9 million or 23, 8% of net revenues compared to $3 4 million or 51, 7% of net revenues in the same period, a year ago, and $3 8 million or 42, 7% of net.
Revenues in the prior quarter.
Military defense sales were 27, 4% of second quarter shipments compared to $26 nine of shipments in the comparable period, a year ago at 20.1% of shipments in the prior quarter.
I think we're quite sales were 52, 4% of second quarter shipments compared to $65 four in the second quarter of fiscal 'twenty one.
And 63, 6% in the prior quarter.
I'd now like to hand, the call over to Doug. Please go ahead. Thank you T D.
We reported a net loss of $4 $6 million or 98 cents per diluted share on net.
Revenues of $7 8 million in the second quarter of fiscal 2022.
Care to a net loss of $5 $2 million or 22 cents per diluted share on net revenues of $6 7 million for the second quarter of fiscal 2021.
And a net loss of $4 2 million or <unk> 17 cents per diluted share on.
Net revenues of $8 8 million for the first quarter of fiscal 'twenty two.
Gross margin.
It was 53, 6% compared to 46, 7% in the prior year period, and 54, 4% in the preceding first quarter to.
The changes in gross margin were primarily due to changes in product mix sold in the three periods.
Total operating expenses in the second quarter of fiscal 2022 for $8 7 million compared.
Compared to a $3 million in the second quarter of fiscal 2021 nine.
A $9 $1 billion in the prior quarter.
Research and development expenses were $5 9 million compared to $5 $7 million from the prior year period at $6 1 million in the prior quarter.
Selling general and administrative expenses were $2 million in the quarter ended September 32021.
Compared to $2 $6 million in the prior year quarter.
$3 million from the previous quarter.
Second quarter fiscal 2000, <unk> operating loss was $4 $5 billion.
Compared to $5 $2 million in the prior year period, and $4 $4 million from the prior quarter.
Second quarter fiscal 2022 net loss.
Interest income and other expense net of $8000 and a tax provision of $42000.
Interest income and other expense net was $16000 and a tax provision of $62000 for same period a year ago.
In the preceding first quarter net loss included interest and other expense of $20000 and a tax benefit of $172000.
Total second quarter pretax stock based compensation expense was $716000 compared to $653000 in the comparable period, a year ago and $823000 in the prior quarter.
At September 32021.
The company had $57 million in cash cash equivalents, and short term investments and $2 $8 million from long term investments.
Compared to $54 million.
Cash cash equivalents and short term investments and $5 8 million long term investments at March 31 2021.
Working capital was $53 $6 million as of September 32021.
Versus $56 million at March 31, 2021 with no debt.
Stockholders' equity as of September 32021.
With $69 9 million compared.
Compare to $75 6 million as of the fiscal year ended March 31 2021.
We still see the supply chain constraints, having a modest impact on our ability to fill all of our orders.
But there has been some improvement.
<unk> changed the situation remains fluid and.
And we do not expect significant permitting constraints before next year.
Given these variables current expectations for the upcoming third quarter, our net revenues in the range of $7 2 million to $8 2 million.
With gross margin of approximately 52% to 54%.
Operator at this point, we will open the call to Q&A.
Thank you.
At this time, we will be conducting a question and answer session. If you'd 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 he would like to remove your question from the queue for.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
Our first question comes from the line of Raj Bindra Gill with Needham <unk> Company. You May proceed with your question.
Hey, good afternoon, everybody. This is actually Dennis asking a few questions for Rajiv.
So I'd like to start off with.
A question about the price increases and when do you expect that the price increases that you are passing on to your customers that will start to show up on the top line.
So we are changing backlog.
All new orders as of December one.
Okay.
New orders.
Got it wonderful and then the.
The other question that I had was relating to have the Gemini one Apu I think on the.
A few calls ago, you'd mentioned that the Jim and I want you should be seeing some volume production in this current quarter. How you know how is that milestone being that are you beginning production how are the supply chain constraints kind of limiting that can you give us an update on the Gemini one volumes.
Yes from the component enable a single.
We are in the pre production more Cushing mean that we are still doing the qualification but.
But the.
But it's already equal we see the demand for it and singular another major challenges still on the software.
To make our allows US software if you are ready for the customer so that the software will be.
A major barrier for the for the.
Availability.
Okay, So you're saying that once the software is ready that will kind of.
Get you one step closer to the to the actual production of.
The Gemini one yes.
From a hardware point of view, yes, we already we just need to a window when the window application.
With software.
Got it alright, well.
That's all that I had thank you.
Okay.
Our next question comes from the line of Jeff Bernstein with Cowen You May proceed with your question.
Yes, hi, guys.
Congratulations on the new patent you guys were just issued on the SRAM structure optimized for in memory computing.
And from that pattern you can see there is not a large instruction set here and it's going to be important for you guys to provide a compiler and software libraries that make the trip easier for.
For people to use so can you just give us some detail on what the deliverables are there and the timing for those.
I think right now.
Lots of things we are doing is really for the brand awareness.
Our singer.
We took 10 months we have.
Good performance in.
Compared to other solutions in the industry, but.
I think we are there.
Still a lot of work to develop the market to get the to win the confidence of the customers.
And so we are.
We have described before.
We have a lot of what.
We put these parties.
We are participating the competition, so we need to award <unk> for the bring awareness.
And hopefully we can pay monthly.
All capability among our peer and also among the customers. So that's our major focus in Idaho.
And Jeff just to add.
For the deliverables, obviously, the compiler stack is critical to that.
Because as Lee Lean mentioned, we're writing a lot of the Apis and the algorithms today, but a lot of folks want to write their own or there is just we can't keep up with all the different applications. So the compiler stack is critical.
Yeah and so.
We're going to have that released to our beta guys. We already have the beta guys identified and that'll be we were hoping to do it by the end of the year. It looks like it might be falling into early next year for the beta guys.
So they'll go through no play with it.
Try to break it and everything else.
And then we will release it to the general public sometime in 2022.
It will be sometime first half of 2022, where it will be available for everyone.
Got you and then so and then I'm assuming that for certain vertical kinds of applications.
That is somewhat generalizable.
Multiple customers might want like the synthetic aperture radar analysis or object recognition et cetera.
We're doing libraries to make that even easier for people is that correct and can you just.
Those vertical markets you've touched on earlier can you just talk about when each of those is going to be deliberate.
Correct. So so you have both libraries and you also have.
Further up the stack the actual Apis are the algorithms and so as you mentioned that has that.
Has either been done or is being done for things like.
The SAR the synthetic aperture radar you know that we've written it also for the <unk> pipeline pilot.
Platform It has already been done.
We've done it for free.
Fisher recognition object detection, we are in the process of doing it for the dense registration.
And we've done some work on re identification as well. So there has been a lot of work that's been done already.
Got it so is it fair to say that by the middle of next year. Some of these key verticals.
Basically be covered and very accessible to customers, who want to start using them.
If they wanted to use our algorithms correct, yes, and like I said some of the some of the entities we deal with getting external.
Software is a problem and so the answer is for folks where it's not a problem those should be available for folks who want to write their own that's that's where we're relying on the.
The compiler stack.
Okay.
Gotcha Okay.
And then just.
I want to understand a little bit more about the environment that you're that you're facing out there in terms of sales.
And understand that you guys are in the.
<unk> execution not training part of the market.
But what we see in the training market.
AWS just didnt elastic search.
Based on the Intel.
Chips, so theyre kind of open to outsiders, they have their own premium custom chips.
It looks like Microsoft is Scott Graeff core Grok, and nimble as training chip partners that they're working with.
Whereas some of the others like Baidu, Alibaba and Google are only doing their own.
Talk about the not invented here or who is open to look at outside chips among those.
Big players out there that could be important partners.
Sure. So you bring up a good place almost all of the large big.
Big data guys have internal chip development happening and they've always had that and but with that said certainly a few bringing a solution that's going to accelerate.
A search or it's going to lower the power or it's going to do something thats important to them.
They are open to it and we haven't seen anybody that basically said no we're designing our own.
As you said a lot of the chips. These guys are doing a very specific functions that are important to them.
And a lot of it.
Is centered around the training as you mentioned, we haven't seen that level of activity for specific search which is what we're focused on.
Got you, but youre feeling is that.
Delivering these kinds of capabilities to some of these large players.
They will be open to looking at these and possibly offering instances on their on their networks correct.
And we've seen that already play out with with the open search.
Again, we demo it on one point and we're waiting for to Plano, but they've already announced us as as a partner on that so yes. They are open.
Gotcha, Okay, and then I just.
Wanted to ask on the non Nokia customers, a 48% of revenue that's the highest since before the pandemic any particular customers that are growing outside of military or whats sort of the status of.
Non Nokia customers.
Yes so.
Sure.
As you looked at the numbers Nokia was down more quarter over quarter than our overall revenue. So obviously the rest of our revenue grew outside of that.
And so we saw strength in some areas that it wasn't one particular area. There was certainly some strength in the military sector. We also had shipped the the end of that last order for the Rad tolerant that we had mentioned we ship half of it in the June quarter and half of it in this past September quarter.
And then we also saw a little bit of a rebounding and some of our customers that do automotive equipment test equipment things like that obviously, the automotive sector had been hit by the by the availability of ships earlier this year and so they were a little bit quiet first half and now that seems to loosen up so.
Some of the equipment guys have come back to us this past quarter as well.
Gotcha.
And then just a request.
Jim will now the largest shareholder has asked you guys too.
You'll get an IP.
<unk>.
Which makes sense to me I think we're now your second biggest non index holder and.
Just.
Kind of back of the envelope it.
Looks like you are building that you own delco.
Telco drive is worth over $10 million potentially and I think it would be worthwhile to have that appraised and have shareholders understand that.
There is some additional asset here that significant beyond the cash that you guys have.
That's true.
We believe that the building is obviously worth a lot more of that.
Luxury better for over 10 years now.
Of course.
Okay, well it would be great to have an appraisal of that.
Okay. Our next question comes from the line of Brett Reece with Janney Montgomery Scott You May proceed with your question.
Okay.
Hi, Thanks for the opportunity.
<unk>.
Have any crypto miners in fact approach Hugh in possibly using the Gemini system.
Yeah.
We have a look at the.
Crypto mining.
I think right now in the market.
They are dedicated chip.
The available for them.
Yes.
Apu is not designed specific for that so are we.
So even though we look at that we don't believe we are suitable okay, but.
But from the general public, but if somebody who want a general purpose.
Payroll part of it.
We'd probably usable.
In the in the form of.
But we do in the crypto mining.
So revenue in Illinois.
Yes.
Right right now for the.
Ongoing customer engagement.
Cause death and Timna.
Tim material revenues for the company.
The additional engineering that must be done.
In the control of our company.
Or is it a.
Additional engineering that must be done by the potential customers' engineering teams.
To make the Gemini system, a commercially viable product for us.
So it depends right. The answer is yes to both right.
We certainly need to continue to develop.
Develop more algorithms more libraries.
More Apis.
But then we also need to make that call.
Pilar stack available so that they can do it themselves.
Because again there there are way too many potential applications going forward for us to keep up and there are some people who just don't want to outsource that so they'll do it themselves.
And supplying them that can power stack will allow them to not have to basically program at the registered level I mean, there there'll be able to do at a much higher language and so the answer is yes, we will need to do some of it and that will be done internally and then we need to enable our customers to do their own as well.
Great.
Thank you for taking my questions.
Thanks, Brett.
Our next question comes from the line of George Gaspar a private investor.
Thank you.
Good afternoon.
Yes.
Just on going with the last question.
Can you give us a very specific example.
Of the testing on a specific.
Entry into the market.
That you're running against competition.
Can you can you give us something that.
We identify with.
Your capacity being much superior to the others out there.
Sure.
So I can give you one we're at the top of it to that.
Right.
Sorry dropped my glasses.
So we are engaged with the customer now we are about ready to do a POC I'm sorry, a proof of concept.
Specifically for the Saar, which is the synthetic aperture radar and how we got to where we are today with them is we.
We did benchmarking for them.
A benchmark that was based off of.
A five kilometer by five kilometer image and.
They needed resolution down to half a meter and one second on one second sorry.
And and so we did the benchmarking.
And Cpus, we did them on Gpus, and we did it on Monday on our Apu, the Gemini and we showed them all the test data and benchmarking and we ended up.
Being chosen and so we're going through the process now.
During the.
The POC definition with them.
That's so application is a perfect example of that.
Actually look at the data from the three possible.
Chip technologies and chose GSI.
Okay.
Kristin and just ongoing on that.
Getting back over in the defense and military side.
There seems to be.
Let's take a continuing.
The requirement for.
Space work that two <unk>.
<unk> and <unk>.
Terrific.
Faster speeds.
And.
Is there any.
<unk> ability.
Have you expanding your activity and in the defense military side.
Because of the speed that you are kept.
The capacity that you have relative to others.
Yes, absolutely.
Several of these applications we've talked about.
Our object detection ATR, which is the automatic target recognition all those are kind of a military.
Application and there are certainly other ones we've worked on signal classification.
So there are certainly several sectors and applications. We've worked on for that market and then as you know we were one of the we partnered with space micro and won a NASA.
And that <unk> was around with with.
But NASA calls in IP, you, which is.
Yeah.
Inference processing unit, but it's essentially a ruggedized board using our solution that can be used in space and so as we discussed it was.
Some time ago was almost coming up on two years ago. We did some initial SCL testing on the Apu and it came back very very good and we are going to some time and hopefully the first half of 2020 to follow on that testing and do.
See you in the Sci Fi kind of testing to round out everything thats required to be able to put the Gemini in this space. So yes, we're certainly going to continue to pursue that avenue as well.
That's very interesting thank you for that.
One question on <unk>.
The issuance of stock in the last quarter, how many shares had been issued.
And.
And was that four.
Issuance to employees basically.
For the increase in shares can you can you elaborate on this.
I don't have the actual number here in front of me, George but somewhere between 100 200000 shares.
Between 100 to 200000 chairs retro should be somewhere about 100 to 200000 shares.
I see.
Our <unk> since the beginning of the year, our fiscal year or are there some SPP.
Purchases and option exercises in fact.
Just this past week or so we had two directors exercise from auctions.
And I believe they are formed force out there for each of those.
Alright and at this point.
And.
Being that the stack has been lower for some time here.
And is there has there been any purchasing of.
In the marketplace to recover shares that are outstanding.
We haven't done any repurchases for over a year now.
That's correct.
Yes, right, Okay alright.
Thank you kindly.
Thanks, George George.
As a reminder, 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.
Our next question comes from the line of Jon Fisher Thorn with Dialectic capital you May proceed with your question.
Yes.
Yeah, Hi, guys. Thanks for taking my question.
I guess as a quick follow up to the last question I've got to ask.
With $50 million in cash and a $10 million building.
And a bright outlook, maybe why you wouldn't be doing share buybacks right now since it was asked.
Well.
We've had a long history of buying back shares.
We went public in March of 2007 and net.
Net of $30 million in the offering and we've already repurchased over $61 million worth of our stock.
We've already taken.
In terms of dollars <unk> off the market based on what the IPO was we.
We have cash in the bank, but we understand that the IP the Apu.
It's a very exciting product there is a very large market that we're addressing with that but there's still work to do and where.
We just feel that that you know.
We want to make sure that we're going to be successful and yet the stock is cheap we all believe that but we think that.
At this point given we've already done in terms of stock repurchases it makes sense to us.
Uh huh.
Keep the cash at this point and make sure that we're successful with our development efforts well that makes sense and it leads to my second question, which is really about your go to market you've talked about.
A proof of concept you're going in and you've talked about competition that youre entering and you've talked about a number of your potential customers or maybe even acquirers, who knows that are also in house competitors.
And so I guess I don't fully understand.
Although it is now it sounds like it's pushed off until kind of Q1 Q2 of next year, what the go to market strategy is at this point.
And so maybe you don't know either but to the extent that it maybe I just missed it I'd love I'd Love you to kind of give me as much granularity as youre willing to on that.
Yes.
So certainly.
Obviously, we have several possible applications I mean, the overall umbrella is search I mean, thats, just a generic term rate, but under the search falls all these different applications.
And so obviously the.
Go to market is where can we show benefit.
These markets right.
<unk>, who sees the most value in our solutions. So that's why we've been focusing and also where's the Tam as well that's why we've gone through this Tam analysis, which we've discussed we've broken it out by segments.
And so right now it's.
Going through that process of showing these the customers in these segments what our value is in some cases, it's lower power in some cases it <unk>.
Faster more queries are faster response times more accurate responses, sometimes it's lower cost.
One of the other benefits that we're able to show customers and this one is really at the beginning stage.
And it's taking.
Some conversations to open up their eyes, but we can also offer and a lot of cases, the mobility aspect to their solution where in the past for them to do a certain function would we require cabinets of us CPU based servers or cabinets of GPU, while with our.
Our solution it could be a couple of racks, which can now be put in a plane.
In a submarine or what have you and so there is that's one of the things that should be able to for them to understand that possibility that all suddenly they can have the solution be mobile as well, maybe I should maybe I should drill down a little bit though on.
Again, <unk> got a lot of exciting applications, there's a big Tam.
But.
Either win or and what application do you think you're furthest along and might get the first signs of revenue when should should we think theres going to be somebody who signs a piece of paper that says I want to pay you for this and then what application do you think that might be in or what couple of applications are you further down the chain and not just an improvement.
Maybe proof of concept is the furthest.
But where are you the furthest today.
I would say, it's in the government and military sectors, so areas like the SAR application.
Some of the object detection.
That would probably be where we're furthest down the line.
I mean, obviously, you know that we're going to be.
Working this.
This open search to Plano and Thats going to kick in sometime in 2022, but it'll be instances, so it'll take a little longer for that revenue. It's a service. It's a SaaS model so that will take a little longer to kick in some of it will kick in in 2022 and the question is how much is not we don't know yet obviously.
Before the open search to pointed out will you have revenue from one of these defense.
Type customers this year.
Even if it's just NRT.
Possibly I mean the.
Timing is hard to predict with the military guys. The answer is we were we should have gotten a aboard our two purchased about now.
It may happen by the end of year May fall into early next year. The timing is not always easy to predict with these folks that were imminent on at least a couple of boards.
But again, let's be clear, it's not we're not talking volume here. This is still under the <unk>.
Kind of a POC, where they'll buy a board they'll test it out prove to themselves that this is really what it is what they want.
It gives them the results that they want and need and then we'll go from there so it'll be onesie twosies kind of things.
So in terms of being like production revenue like real recurring either SaaS revenue or something else is that really 2023.
Certainly not earlier than second half of next year.
I mean, yeah, I don't see any way as the second half of next year.
Would be the earliest but yes, it could fall into 2023 again hard to really predict exactly when that's going to happen.
Totally understand but you know when the soonest it could be right. If everything goes well so find second half of next year and and.
The last time, I'll, just try and once again specify like.
In the.
Defense Department business I get it because you're not competing against guys inside the defense of Heartland, making the same product.
But in a lot of these other instances in the commercial market you are.
And so just give me a quick like.
Is the is it just to win competitions and hope people recognize you because you're still going to have guys inside of Google and Microsoft and Baidu and everywhere else going no use ours, you pay us anyway, and we've designed it for one ship it or is there like you guys have feet on the street knocking on doors.
Help me understand what the commercial go to market strategy is specifically.
No. We're of course talking to these folks and again as I mentioned earlier, they're all doing chip designs like you said and like I can't or if it was Jeff you had mentioned that.
But we.
We haven't seen where it's really specific on the search per se.
Generally some kind of a function, but the guys we're talking to.
Again the.
The open open search as part of AWS and as you say AWS is doing or Amazon is doing their own chips. So why is that they've already chosen as a partner because obviously they are not doing anything internal that matches, what we're doing and so.
We will always be competing against some internal <unk>.
Design, but Ken when I say, we chip manufacturers, but we haven't seen where that we're offering are kind of value we haven't seen that.
That effort within these companies in the search area.
The loss of the large large scale database search.
Still a very new market.
AWS open associate just started just a couple of months ago.
And we have this competition bidding scale.
So I mean.
The first of its kind.
The industry neighborhood, but this will come with this kind of competition before so.
So it's just getting started.
And Jimmy <unk> Bye.
By far we Havent seen these are the best.
Do these kind of jobs.
Okay.
We can perform well in the competition, so that they'll put them onto our all variations in the.
In this area. So I mean, I guess my concern is that your point exactly that this is very new very new right you're about to get to to point out.
And we're talking about revenue that.
Might start to ramp in late 'twenty three.
So.
I just I.
I don't know what your what's your backup plan, if we're sitting here having this call.
At the end of 'twenty, three and you're like well it should be in second half 'twenty four it's very new right people are still doing evaluations or at the end of 'twenty four and its 25 like at what point do you do you have another path or is there no. Pat this is the one path and we're all in no no. We are more than well the surgery is the one area. We're looking.
The other thing is that we talk about it.
Defense and government projects.
Uh huh.
You know the loss or loss of <unk> <unk>.
Is to develop the device, which can go into the space.
So we started development.
The prime contractor can pick up JC virus, and then put into our southern.
It can apply to do appear to have many many companies many.
Many many application so.
It's more than the search.
We talked about we are off to a recognition that we can do we can do we can do you know.
The registration of many many many year computer computer vision type work.
So so we are hopeful and no no one thing, but we are not certain when the production revenue will come in.
But we hope we as a company and we believe so.
Great. Thanks, a lot guys.
Sure.
At this time, we have reached the end of the question and answer session.
Thank you for.
Thank you all for joining US we look forward to speaking with you again, when we do pull also quarter physical 2020 to resolve.
Thank you.
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