Q1 2025 GSI Technology Inc Earnings Call
Operator: These risks and uncertainties are described in the company's form 10-K filed with the Securities and Exchange Commission. Additionally, I have been asked to advise you that this conference call is being recorded today, July 25, 2024, at the request of GSI Technology. Hosting the call today is Li-Lin Hsu, the company's chairman, president, and chief executive officer. Also on the call are Douglas Schirle, chief financial officer, and Didier Lasserre, vice president of sales. I would now like to turn the call over to Mr. Hsu. Please go ahead.
These risks and uncertainties are described in the company's Form 10-K filed with the Securities and Exchange Commission. Additionally, I've also been asked to advise you that this conference call is being recorded today July 25th 2024 at the request of GSI technology.
Speaker Change: Hosting the call today is Leland shoot the company's chairman President and Chief Executive Officer with him are Douglas Shirley Chief Financial Officer, and DBA Lassalle, Vice President myself I would now like to turn the call over to Mr. Hu. Please go ahead Sir.
Li-Lin Hsu: Good day, everyone, and welcome to our first quarter FY 2025 Learning School. Let's start with the Q1 result. Our first quarter revenue of $4.7 million was within our guidance range, despite lower SIGMA cost sales and lower sales to our military plant contract. Additionally, the mix of products we sold. affect the Outpost Margin?
Leland Hu: Good day, everyone and welcome to all fourth quarter FY 2021 is cool.
Speaker Change: They start with the Q1 result.
Speaker Change: Fourth quarter revenue of 47 meeting well within our guidance range.
Speaker Change: By lower pigment cost deals.
Speaker Change: And no sales to our marine contractors.
Speaker Change: Additionally, the mix of what products, what we saw.
Speaker Change: So affect the all gross margin, causing gross margin to come in and they're all doing well in all guidance range.
Li-Lin Hsu: causing growth margin to come in at the low end of our guidance range. Right now, our team is focused on generating new revenue from our Gemini APU to address the expected decline in our legacy SM business. Our main goal this year is to launch a new business line with Gemini 1 and secure more SBIR contracts with Gemini 2. This will help us reverse the revenue decline and achieve financial stability. And ultimately, we will send the growth when we bring Gemini 2 online.
Speaker Change: Right now our teams.
Speaker Change: He is focused on generating new revenue for al Jimi naive B U two or twice that.
Speaker Change: The decline in our legacy business.
Speaker Change: All main go to C. U S launch do pieces line, which came in at one and skill more.
Speaker Change: I'm, sorry with Gemini two.
Speaker Change: This would help us reverse the revenue decline.
Speaker Change: Financial stability.
An argument to be center growth, we've given it to online.
Li-Lin Hsu: Let me explain how we are working toward this goal. We are preparing to launch our new GXL platform for fast vector search, built on Gemini One, which will be available as a cloud-based, All on-premise solutions, or Homebreaking Technology. Significantly reduce the time needed to create and update large vector database indexes, increasingly using Gen AI and e-commerce, providing a critical advantage for companies that rely on timely data updates. The video will provide more details.
Speaker Change: Let me explain how we are working toward is cool.
Speaker Change: We are preparing to launch all new gx still critical for phosphate to search.
Jim: Jim you're not one which will be available with a call pieces.
Speaker Change: On premise solutions.
Speaker Change: One braking technology.
Speaker Change: We continue to reduce the time needed to create an offtake large Victor database index.
Jimmy: Recently, using Jimmy I N E.
Speaker Change: E Commerce.
Speaker Change: Providing a critical advantage for companies that rely on data Apis.
Speaker Change: Video will provide more detail on this.
Speaker Change: Yeah.
Li-Lin Hsu: Additionally, we are training our Department of Defense Small Business Innovation Research, or SBIR, Proposal Pipeline for the Gemini APU. This contract can range from $75,000 to over $2 million, typically payout over 9 to 18 months, so far.
Speaker Change: Additionally, we couldn't meet all departmental deepen small.
Speaker Change: Small increases in wages.
Speaker Change: You know vision research OSB at Copel.
Cool.
Speaker Change: Postal Piper.
Speaker Change: Pipeline for the Gemini Apu.
Speaker Change: This contract can range from 75000 to over $2 million.
Speaker Change: She'd be coated pay all overnight to 18 months.
Speaker Change: So far.
Li-Lin Hsu: We are now in Phase 1 and Phase 2 SBIR consultations. We are meeting our milestones on our own track to complete them in calendar 2035. Didier will expand further on these SBIR opportunities in his comments. We are also on track to begin customer sampling Gemini 2 software in early calendar 2025. The chief has been successfully mounted onto a wall, allowing our software team to work with it. Our goal is to finalize the firmware and complete the software library by December 2024. We have uncovered nanoblocks on the first silicon.
Speaker Change: We have a long phase one and phase two SBA I'll come to life.
Speaker Change: We are meeting our milestones and are on track to complete that you can get in the 2000 and pretty funny.
Speaker Change: D deal, where you can further obese SPL to meet us.
Speaker Change: Please comment.
Speaker Change: Yeah.
Speaker Change: We are also on track to be to be getting customer simply Gemini two software you're already carried into 2025.
Speaker Change: The truth is that's the 40 monkey onto a bolt.
Allowing our folks who are keen to what we see.
Speaker Change: Our goal is to finalize the phone will then complete the software library that December 2024.
Speaker Change: We have uncovered my mailbox older folks that he could.
Li-Lin Hsu: The good news is that there are workarounds for all of those to continue firmware and software development without mass change. Thanks to our success in working with the Chiefs, at MultiPortable. We are actively seeking a strategic partner to scale resources, funding, and expertise for future development. To increase our chances of successful engagement, the team is preparing to demonstrate more than 10 times improvement in 1-bit and 2-bit processing with Gemini 2. We aim to validate this concept by the December quarter with a 1-bit and 2-bit compute-in-memory demo. Moreover, successfully showcasing this breakthrough will enable us to have a more productive discussion with potential strategic partners. Professor Teddy O'Neill.
The good news is that they all will go wrong for all of those to continue firmware and software can build them. We saw marked change.
Speaker Change: Sent to all success that you can walk in with the truth.
Speaker Change: Multiple tables.
Speaker Change: We are actively seeking a strategic partner.
Speaker Change: Two skilled resources.
Speaker Change: <unk> expertise for future development.
Speaker Change: To increase our chances of first of all your engagement. The team is preparing to demonstrate more than 10 times improvement in one bit and goopy processing, which Jim in a tube.
Speaker Change: We aim to validate this concept.
Speaker Change: December quarter, we still wouldn't be and could be computer memory them.
Speaker Change: First of all is showcased in the script too.
Speaker Change: Where are you enable us to have a more productive discussions with potential strategic partners.
But as I stated earlier.
Li-Lin Hsu: We are diligently working to launch and monetize the Gemini 1 and 2 platforms. We are preparing to launch the GXO platform to establish a recurring revenue stream in the fast vector search market. In addition, we are actively writing multiple SBIR proposals to build a pipeline of future revenue streams and offset the remaining development costs of Gemini 2 with these unique compute-in-memory capabilities. Our compute-in-memory APU promises to deliver essential power and time-saving solutions to the rapidly trending AI market. Now, I hand the call over to Didier, who will discuss our business development and sales activities.
Speaker Change: We are diligently working to launch and monetize the Gemini one ankle platform.
Speaker Change: We are preparing to launch the Gx D O classroom.
Speaker Change: We establish a recurring revenue stream in the phosphate market.
Speaker Change: In addition, we are writing.
Speaker Change: Mani boys.
Proposals two fewer peppered on all future revenue stream and Allstate remain empty building pulse ox Jupiter two.
Speaker Change: With these unique compute and memory capabilities.
Speaker Change: All computer memory, Apu promises to essential power intensive.
Speaker Change: These solutions.
Speaker Change: With a rapidly eat printing market.
Speaker Change: No no co over to Didier who will discuss the offices the government agency.
Speaker Change: Feels like a T V.
Didier: Please go ahead D D.
Didier Lasserre: I want to expand on two topics that Lillian highlighted, the pending launch of GXL and the building of our SBIR pipeline. Let's start with fast vector search and our new platform for this market, GXL. First, let me explain the problem GXL solves and why it's important. The size of vector basis is growing fast, especially with Gen AI and vector similarity search for e-commerce. Many of these databases use the HNSW algorithm to build their indexes because it provides quick and accurate search results.
Didier: Leanne.
Didier: I want to expand on two topics that marine highlighted the pending launch of GSL and the building of our S. P. IR pipeline, let's start with the fast Victor search and our new platform for this market called G. S. L.
Speaker Change: First let me explain the problem <unk> sell salt and why it's important.
Speaker Change: The size of Victor basis is growing fast, especially with Jenny I and Victor similarity search for E. Commerce. Many of these databases using H and S. W algorithm to build indexes because it provides quick and accurate search results.
Didier Lasserre: However, building an HNSW index takes a long time, which is a problem for databases needing fast and accurate information. One way to fix this is by speeding up the calculations needed to build or refresh the index by running them in parallel.
However building an H N S. W Index takes a long time, which is a problem for databases needing fast and accurate information one.
Speaker Change: One way to fix this as by speeding up the calculations needed to build or refresh the index by running them in parallel.
Didier Lasserre: These calculations take most of the time, so making them faster is crucial. Our in-compute memory APU technology is designed for this. It enables massive parallel processing, solving the slow index building issue. The APU processes data directly in memory at the bit level with millions of bit processors working simultaneously.
Speaker Change: These calculations take most of the time, so making them faster is crucial.
Speaker Change: In compute memory Apu technology is designed for this enables massive parallel processing solving the slow index building issue.
Speaker Change: The Apu processes data directly in memory at the pit level with millions of good processors working simultaneously.
Didier Lasserre: This means it can handle large amounts of data quickly, reducing the index build time by about 85% compared to traditional CPU-based solutions. The three main benefits of our GXL solution are scalability; it provides fast access to information for Gen AI and e-commerce recommendations, even as these applications grow to billions of vectors. The second benefit is lower, excuse me, lower operational costs. By using computational resources for less time, especially in cloud computing, where costs are billed hourly, it saves money.
Speaker Change: This means that can handle large amounts of data quickly, reducing the index build time by about 85% compared to traditional CPU based solutions.
Speaker Change: The three main benefits of our gx cell solution. Our scalability. It provides fast access to information for Jennie O N e-commerce recommendations, even as these applications grow to billions of vectors.
Speaker Change: Second benefit is lower excuse me lower operational cost.
Speaker Change: Using computational resources for less time, especially in cloud computing, where costs are built early it saves money.
Didier Lasserre: And the last benefit is faster updates. New products can be added or deleted to the index more quickly in e-commerce applications, leading to timely recommendations and increased revenue opportunities. We recently published a white paper and a blog on Medium about efficient HNSW indexing.
Speaker Change: And the last benefit is faster updates new products can be added or deleted into the index more quickly and e-commerce applications, leading to timely recommendations and increased revenue opportunities.
Speaker Change: We recently published a white paper and a blog on medium about efficient H N. S. W. Indexing be sure to check those excuse me be sure check those out for more information.
Didier Lasserre: Be sure to check those out for more information. The GXL platform is being prepared for launch, and we aim to begin connecting with the vector database companies that we have identified and then expand to larger e-commerce players. Switching to the build-out of our SBIR pipeline and our focus on landing these Phase I and Phase II contracts from the Department of Defense (DoD). We view this strategy as a highly efficient and effective way of increasing awareness of GSI's APU within the DoD.
Speaker Change: <unk> platform is being prepared for launch and we aim to begin connecting with the vector database companies that we have identified and then expand to a larger e-commerce players.
Speaker Change: Switching to the build out of our S. P I, our pipeline and our focus on landing these phase one and phase two contracts from the department of defense or D O D.
Speaker Change: We view this strategy as a highly efficient and effective way of increasing awareness of Gsi's Apu within the D O D.
Didier Lasserre: These SBIR awards validate our statements regarding the APU's performance and benefits with many large divisions within the DoD and can bring a significant multiplier effect for future opportunities, as many of these applications will have dual use for defense and commercial. This is why we have focused resources on submitting proposals and then prioritizing the execution of these contracts.
Speaker Change: U S. B IR awards validate our statements regarding the Apu's performance and benefits with many large divisions within the D. O D and can bring a significant more multiplier effect for future opportunities as many of these applications will have dual use for defense and commercial.
This is why we are focused resources are submitting proposals and then prioritizing the execution of these contracts.
Didier Lasserre: We are working on a phase one, excuse me, we are working on a phase two SBIR contract with the Air Force worth 1.1 million, which we started in 2023 and are now over 25% complete. Additionally, we have a Phase II SBIR contract with the Space Development Agency valued at $1.25 million, and we are over 50% complete on this project. We recently secured a new Phase I SBIR with one of the largest divisions of the DoD, a division that's new to GSI APU's technology. It has a value of up to $250,000.
Speaker Change: We are working on our phase one excuse me we are working on our phase two S. P. I our contract with the Air Force worth $1 1 million, which we started in 2023 and are now over 25% complete.
Additionally, we have a phase two S. P. I R contract with a space development agency valued at 1.25 million and we are over 50% complete on this project.
Speaker Change: We recently secured a new phase one S. P. I R. With one of the largest divisions of the D. O D. A division that's new to GSI Apu's technology. It has a value up to $250000.
Didier Lasserre: We will give more details on this latest win once the contract is signed. We are currently preparing several other SBIR proposals, adding up to a total pipeline of $6 million. Our next submission will be for a Phase II SAR space-level onboard contract worth $1.25 million. In addition to SBIRs, we have initiated the process of seeking additional government funding to enhance the resources we could dedicate to further developing G2.
Speaker Change: We will we will give more details on this latest win once the contract is signed.
Speaker Change: We are currently preparing several other S. P. IR proposals, adding up to a total pipeline of $6 million. Our next submission will be for a phase two saar space level onboard contract worth one point to $5 million.
Speaker Change: In addition to S. P. I ours, we have initiated the process of seeking additional government funding to enhance the resources, we could dedicate to further developing G to.
Didier Lasserre: This funding will enable us to expand the Gemini 2 product line by creating a version for advanced edge AI applications. On a final note regarding APU opportunities, we sold a Gemini 1 LIDA car to a major aerospace and defense contractor who will evaluate this technology for various underclosed applications. We ship the card in the June quarter, and the P.O. also provides GSI software training in the September quarter.
Speaker Change: This funding will enable us to expand the Gemini two product line by creating a version for advanced edge AI applications.
Speaker Change: On a final note regarding Apu opportunities, we sold a Gemini one liter car to a major aerospace and defense contractor, who will evaluate this technology for various under closed applications. We shipped the card in June quarter and the appeal also provides GSI software trading in the September quarter.
Didier Lasserre: Although these sales generate minor revenue, this opportunity is valuable for prospecting engagement with this prominent contractor. We are excited to see this customer using our technology. Regarding the two SAR prospects we've mentioned in previous calls, one is on hold as we finalize some documentation with that customer. The other is looking to expand the scope of our services that we can provide in different areas of their operation where they could possibly use the APU.
Speaker Change: Although these joe's excuse me, although these sales generate minor revenue. This opportunity is valuable for prospecting engagement with this prominent contractor we're excited to see this customer using our technology.
Speaker Change: Regarding the two Saar prospects, we've mentioned in previous calls one is on hold as we finalize some documentation with that customer. The other is looking to expand the scope of our services that we can provide in different areas of their operation, where they could possibly use the apu. Our team is actively investigating how to accelerate the delivery of these additional service.
Didier Lasserre: Our team is actively investigating ways to accelerate the delivery of these additional services. Now, let me switch to the first quarter's customers and product breakdown. In the first quarter of fiscal 2025, sales to Nokia were $998,000, or 21.4% of net revenues compared to $1.9 million, or 33.5% of net revenues the same period a year ago, and $694,000, or 13.5% of revenues in the prior quarter. Military defense sales were 31.9% of first quarter shipments compared to 33.8% of shipments of the comparable period a year ago and 35.5% of shipments in the prior quarter.
Speaker Change: Yes.
Speaker Change: Now, let me switch to the first quarter's customers and product breakdown.
Speaker Change: In the first quarter of fiscal 2025 sales to Nokia were 998000, or 21, 4% of net revenues compared to $1 9 million or 33, 5% of net revenues the same period, a year ago, and 694000 or 13, 5% of revenues.
Speaker Change: In the prior quarter.
Speaker Change: Military defense sales were 31, 9% of first quarter shipments compared to 33, 8% of shipments in the comparable period, a year ago, and 35, 5% of shipments in the prior quarter.
Didier Lasserre: Sigma quad sales were 36.3% of first quarter shipments compared to 58.6% in the first quarter of fiscal 2024 and 42.4% in the prior quarter. Regarding our SRAM business outlook, while our largest customer has announced some business challenges, our current expectations for orders from them remain stable for the remainder of the calendar year. Several other S-TRAMP customers are currently managing their inventory levels, and we anticipate they will resume placing orders before the end of the calendar year. Additionally, we believe that customers who were previously reducing their use of SRAMs have now stabilized.
Speaker Change: <unk> sales were 36, 3%, our first quarter shipments compared to 58, 6% in the first quarter of fiscal 2024.
Speaker Change: And 42, 4% in the prior quarter.
Speaker Change: Regarding our SRAM business outlook, while our largest customer has announced some business challenges our current expectations for order from them remained stable for the remainder of the calendar year.
Speaker Change: There were other SRAM customers are currently managing their inventory levels and we anticipate they will resume placing orders before the end of the calendar year.
Speaker Change: Additionally, we believe that the customers who were previously reducing their use of best friends have now stabilized.
Douglas M. Schirle: And now, I'd like to hand the call over to Doug. Doug, go ahead, please. Thank you, Didier.
Speaker Change: I'd now like to hand, the call over to Doug. Doug Go ahead. Please thank you D. Today.
Douglas M. Schirle: The company reported net revenues of $4.7 million for the first quarter of fiscal 2025, compared to $5.6 million for the first quarter of fiscal 2024 and $5.2 million for the fourth quarter of fiscal 2024. The decline in revenue is due to lower Sigma Quad sales and lower sales to our military prime contractors. Gross margin was 46.3%. In the first quarter of fiscal 2025, compared to 54.9% a year ago in the first quarter of fiscal 2024 and 51.6% in the preceding fourth quarter of fiscal 2024. Decreasing gross margin in the first quarter of fiscal 2025 was primarily due to product mix and the effect of lower revenue on fixed costs and our cost of revenue.
Doug: The company reported net revenues of $4.7 million for the first quarter fiscal 2025 compared to $5 $6 million for the first quarter of fiscal 'twenty 'twenty four and four.
Speaker Change: $5 $2 million for the fourth quarter of fiscal 'twenty 'twenty before the <unk>.
Speaker Change: Decline in revenue was due to lower Sycamore club sales and lower sales to a military prime contractors.
Speaker Change: Gross margin was 46, 3%.
Speaker Change: The first quarter of fiscal 2020 five.
Speaker Change: We're at 54, 9% from year ago first quarter fiscal 2024, and 51, 6% in the preceding fourth quarter of fiscal 2024.
Speaker Change: The decrease in gross margin in the first quarter of fiscal 2025 was primarily due to product mix and the effect of lower revenue on the fixed costs in our cost of revenues.
Douglas M. Schirle: Total operating expenses in the first quarter of fiscal 2025 were $6.8 million compared to $8.2 million in the first quarter of fiscal 2024 and $7.2 million in the prior quarter. Research and development expenses were $4.2 million compared to $5.2 million in the prior period and $4.8 million in the prior quarter. Selling General and Administrative Expenses were $2.6 million in the quarter ended June 30, 2024, compared to $3 million in the prior year quarter and $2.4 million in the previous quarter.
Speaker Change: Total operating expenses in the first quarter with Bristol 'twenty 'twenty five for $600 per day for $200 in the first quarter of fiscal 'twenty, 'twenty, four and $7 $2 million in the prior quarter.
Speaker Change: Research and development expenses were $4.2 million compared to $5 $2 million on the part occurred at the forefront of million dollars from the prior quarter.
Speaker Change: Selling general and administrative expenses were $2 $6 million in the quarter ended June 32024, compared to $3 million in the prior year quarter and $2 $4 million from the previous quarter.
Douglas M. Schirle: First quarter fiscal 2025 operating losses were $4.7 million, compared to an operating loss of $5.1 billion in the prior year period and an operating loss of $4.5 million in the prior quarter. First quarter fiscal 2025 net income included interest, another income of $55,000, and a tax provision of $57,000, compared to $80,000 in interest in another attempt and a tax provision of $51,000 for the same period a year ago. As of the preceding fourth quarter, the net loss included other income of $108,000 and a tax benefit of $85,000.
Speaker Change: First quarter fiscal 'twenty to 'twenty, five operating loss was $4 $7 million.
Speaker Change: Compared to an operating loss of $5 $1 billion in the prior year period.
Speaker Change: And an operating loss of $4 $5 million in the prior quarter.
Speaker Change: First quarter fiscal 'twenty 'twenty, four and net income included interest and other income of $55000.
Speaker Change: Provision of $57000.
Speaker Change: Compared to $80000 in interest and other income and a tax provision of $51000 for the same period a year ago.
Speaker Change: The preceding fourth quarter net loss included other income of $108000 and a tax benefit of $85000.
Douglas M. Schirle: Net income in the first quarter of fiscal 2025 was $1.1 million, or $0.04 per diluted share, reflecting a one-time gain of $5.7 million on the sale and leaseback transaction related to the sale of the company's headquarters, compared to a net loss of 5.1 million dollars. $0.21 per dividend share for the first quarter of fiscal 2024 and a net loss of $4.3 million, or $0.17 per diluted share, for the fourth quarter of fiscal 2024. Total first quarter pre-tax stock-based compensation expense was $658,000, compared to $820,000 in the comparable quarter a year ago and $693,000 in the prior quarter.
Speaker Change: Net income in the first quarter of fiscal 2025 was one $1 million.
Speaker Change: Four cents per diluted share.
Speaker Change: Reflecting the one time gain of $5 $7 million on the sale and leaseback transaction related to sale of the company's headquarters.
Speaker Change: Compared to a net loss of $5 $1 billion or 21 cents per diluted share for the first quarter of fiscal 2024.
Speaker Change: And a net loss of $4 $3 million or 17 cents per diluted share for the fourth quarter fiscal 2024.
Speaker Change: Total first quarter pretax stock based compensation expense was $658000 compared to $820000 in the comparable quarter, a year ago and $693000 from the prior quarter.
Douglas M. Schirle: June 30, 2024, the company had $21.8 million in cash and cash equivalents, compared to $14.4 million at March 31, 2024. Working capital was $25.7 million as of June 30, 2024, converting to $19.1 billion on March 31, 2024. Stockholders' equity as of June 30, 2024 was $38 million, compared to $36 million as of the fiscal year ended March 31, 2024.
Speaker Change: At June 32024, the company had $21 million of cash and cash equivalents.
Speaker Change: We're fortunate port $4 million at March 31st 2024.
Speaker Change: Working capital was $25 $7 million.
Speaker Change: As of June 32024, compared to 19 1 billion at March 31 2024.
Speaker Change: Stockholders' equity as of June 30th towards 24 was $38 million compared to $36 billion. That's what the fiscal year ended March 31 2024.
Douglas M. Schirle: During our fourth-quarter earnings call in May, we announced that the company had initiated a comprehensive strategic review and established a special committee of the board to evaluate various strategic alternatives. We have engaged Needham & Company as our strategic and final financial advisor to assist in this process. Currently, we are in discussions regarding potential strategic opportunities and are encouraged by the direction of these preliminary discussions. Operator, at this point, we will open the call to Q&A. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your request has been made.
Speaker Change: During our fourth quarter earnings call today, we announced that the company had initiated a comprehensive strategic review and established a special committee of the board to evaluate various strategic alternatives.
Speaker Change: We are engaged in different countries as our strategic and final adviser financial adviser.
Speaker Change: So this process.
Speaker Change: Currently we're in discussions regarding a potential strategic opportunities and we're encouraged by the direction of these preliminary discussions.
Speaker Change: Operator at this point, we will open the call to Q&A.
Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key.
Speaker Change: Thank you we will now be conducting a question and answer session. 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. You May press star two if he would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the starkey.
Operator: One moment, please, while we poll for questions. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Our first question comes from Luke Bohn. Please proceed with your question.
Speaker Change: One moment, please while we poll for questions.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Our first question comes from Luke Tom.
Speaker Change: Please proceed with your question.
Luke Bohn: Hi, I'm wondering if you could do a brief kind of skim over the cost benefit and contemplations about potential leasing or sale or going this more diverse route, which it seems like you're laying out in this call, as well as potential for a key partnership. If you could give kind of a succinct current refinement of all those prospects and your leading direction. Thanks.
Speaker Change: Hi.
Luke Bohn: I'm wondering if.
Luke Bohn: Yeah.
You have a brief yeah kind of skipped over the.
Luke Bohn: Cost benefit and yes.
Luke Bohn: Contemplations about potentially seen or sale or going to.
Luke Bohn: Yeah more diverse route which it seems like you were laid out on this call as well as the potential for a key partnership.
Speaker Change: Yes, if you could give kind of a distinct yeah current refinement of the of all of those prospects and your leading direction.
Douglas M. Schirle: What exactly are you asking? Are you asking about how we decided to sell the building?
Speaker Change: So what exactly are you asking.
Speaker Change: You're asking about how outside of the building.
Luke Bohn: Oh, no, not the building. I'm referring to the GPU or the APU, sorry, Gemini APU project. And, yeah, if you had, since the last call and prior calls, you were building up to, yeah, hopefully, a decision on a route for funding and development to progress into Gemini 3. Yeah, I'm just wondering if you had a way of, like, succinctly describing what your current leading prospects are for either the major funding or at least, that technology.
Speaker Change: Oh, no not the building.
Speaker Change: Referring to big keep you are the Apu started Gemini Apu project and if you had since the last call them.
Speaker Change: Prior calls you were.
Speaker Change: Building up to yeah, hopefully a decision on a route for funding and development to progressing the Gemini three.
Speaker Change: I'm just wondering if you had.
Speaker Change: Kind of a way of like yes.
Speaker Change: Yes, I think we described and what your current leading.
Speaker Change: The prospects are for either the yeah, the major funding or leasing.
Speaker Change: All of that technology.
Douglas M. Schirle: Yes, we still have a continued discussion on Gemini 3 with, you know, the hyperscaler and, you know, HVM vendors. But the key is really that we need to demonstrate our GPU capability on 1-bit and 2-bit processing. So that's why we are focused on doing this, and we want to prove it on the G-Tool. You know, by the end of the year, the calendar year. Yeah, so there's definitely.
Speaker Change: Yes.
Speaker Change: We have still continue with the discussion on German answer you with a.
Bose: Hi Bose.
Bose: And and you know H VM vendors.
Bose: But the key is the beauty of we need with 10 months. We are I'll give you a view of a beauty capability on that one.
Bose: And to be processing.
So while we are focused.
Bose: And we want to prove it on the on the G tube and.
Bose: You know five days, what would you see that getting to you.
Douglas M. Schirle: Yeah, so there's definitely interest, but they'd like to see the capabilities of the parts so we can show them some benchmarks. So we're working on that now. Okay. Thank you.
Speaker Change: There is definitely interest, but they'd like to see the capabilities of the parts.
Bose: Where we can show them some benchmark so we're working on that now.
Bose: Okay excellent.
Luke Bohn: Okay. Excellent. Yeah, that's mainly the questions.
Speaker Change: Yeah, that's that's mainly Oh my gosh.
Luke: Thanks Luke.
Luke: Yeah.
Michael Cooper: Our next question comes from Michael Cooper. Please proceed with your question.
Luke: Our next question comes from Michael Cooper. Please proceed with your question.
Michael Cooper: Hi Guys, can you tell me how you validated these benchmarks in-house? And now you have to formalize the process for outside clients and then start showing them. Do you know the answers to these questions that are coming down the pipe?
Michael Cooper: Hi, guys.
Michael Cooper: Can you tell me what these benchmarks have you validated these benchmarks in house and now you have to formalize the process for outside clients and then start showing them do you know the answers to these questions.
Speaker Change: They're coming down the pipe.
Douglas M. Schirle: Yeah, we can. We have a calculation, but it's just a calculation, and right now, we are trying to get the G2 working so we can run it on the HR device. That's what we are doing, basically.
Speaker Change: Yeah. We are we can we have a calculation, but oh, it's just a calculation and how we are trying to get the team working so we can run beyond the HR device.
Speaker Change: That's why we got to we basically got nothing.
Douglas M. Schirle: We're actually working with the first silicon, and the first silicon has turned out to be very solid for the first silicon, and I think, as we've mentioned before, there are no major bugs, nothing that we can't work around. We're right now accessing the part that's been mounted on boards and trying to gather as much data and information as we can, working with what we have. In order to be able to run those benchmarks, we just need all of the algorithms and the libraries on the software set complete. On the hardware side, as Lelene said in his section, there have been no bugs that are a showstopper at this point, and so it's just getting the libraries completed so we can run those benchmarks.
Speaker Change: We're actually working with the first silicon and the first silicon has turned out to be a very.
Speaker Change: Solid for first silicon and in <unk>.
Speaker Change: As we've mentioned before there are no major bugs nothing that we can't work around and we're right now accessing the part they've been mounted on board and then trying to gather as much data and information as we can working with with what we have right and to in order to be able to run those benchmarks, we just need all of the the algorithms and the law.
Speaker Change: Agrees on the software side complete so on the hardware side as we mean said you know in his section there have been no no bugs that are our show stopper at this point and so it's just getting the libraries completed so we can run those those benchmarks.
Douglas M. Schirle: And in those libraries and the algorithms, there are fewer critical pinch points, if you will.
Speaker Change: And in those libraries in the algorithms there's less critical.
Speaker Change: Pinch points, if you will.
Douglas M. Schirle: Well, it's just different, right? With the hardware, you have a lot of moving parts, and you, you know, you have a lot of potential bugs with the software in the libraries. It's just time. It's just, you know, the folks who are doing that by our Israeli facility. And it's just a matter of time to complete those libraries.
Speaker Change: Well, it's just different right. It's you know with the hardware you have a lot of moving parts and you. You know you have a lot of potential bugs with the software and the libraries is just time.
Speaker Change: As you know the folks that that's being done by our Israeli facility and it's just a matter of time to complete those libraries.
Michael Cooper: And if I could just extend one more question about, okay, so let's say you achieve all this. What does the market look like? How large could it potentially be within your channel? and what's the gross margin? And is it like the hyper scalers might buy hundreds or thousands of $30,000? Unknown Attendee, Brett Reiss, Didier Lasserre, Nicolas Doyle, Unknown Attendee, Brett Reiss, Didier Lasserre, George Gascar, Luke Bohn, GSI Technology Inc. So it works really quick.
Speaker Change: And if I could just extend one more question about okay. Let's so let's say you achieve all of this.
Speaker Change: What does the market look like how large potentially within your channels.
Speaker Change: And what's the gross margin and it is it like the Hyperscale scalar is might buy.
Speaker Change: Hundreds or thousands of a 30000 dollar.
Speaker Change: System or what does that.
Speaker Change: So it went from something like sure. So Gemini two is a little different going to market and Jim and I won so Jim and I wanted if you recall, we have some some cloud based usage models and then we also sold some board slash systems.
Douglas M. Schirle: Sure. So, Gemini 2 is a little different going to market than Gemini 1. So, Gemini 1, if you recall, we have some cloud-based usage models, and then we also sold some boards and slash systems. Gemini 2 is a little different, I shouldn't say a little different; we can expand to that.
Speaker Change: Jim and I took a little different I shouldn't say a little differently, we can expand to that so where some of the models. We're looking at will be cloud based.
Douglas M. Schirle: Some of the models we're looking at will be cloud-based usage revenue. We will be selling some boards and some systems, but we also have, which is very key to some of the markets we're looking at, the opportunity to sell actual chips. So with Gemini 1, a chip sale was not viable, and we've talked about, you know, the dependence on an FPGA that was on the original leaderboard with Gemini 1.
Speaker Change: You know usage.
Speaker Change: Kind of revenue, we will be selling some boards and some systems, but we also have which is very key to some of the markets. We're looking at the opportunity to sell actual chips, so when Jim and I won.
Speaker Change: Chip sale is not viable and we've talked about the dependence on an FPGA that was on the original lead aboard with Gemini, one with Jim and I to Theres not that restrictions. So we can sell the chip as well and so depending on the customer they may want to buy a chip.
Douglas M. Schirle: With Gemini 2, there's not that restriction, so we can sell the chip as well, and depending on the customer, they may want to buy a chip, they may want to buy a board, they may want to buy it. Yeah, Gemini 2 is a target.
Speaker Change: They may want to buy a board they may want to buy a server that has multiple boards and then in some of our revenue streams it'll be like I said, the cloud based kind of a.
Speaker Change: Revenue.
Douglas M. Schirle: Yeah, Gemini 2 is targeting the HAI processing market. Okay, we are not targeting a cloud-based But anyway, the HAI market, I agree, the research report is... The whole AI computing is like a $20, mid $20 billion market right now in 2024 and growing at, Meet 20 to Meet 30, depending on who is publishing the data and the CAGR. So I think it's a fast-paced payment market, and that's where we are targeting.
Speaker Change: Yeah, Jim and I to ease the hanmi team at the.
Speaker Change: H a processing market. Okay. We are not public do you give me a call basis.
Speaker Change: But anyway, the H M market I do either.
Speaker Change: What are we supposed to do voice.
Speaker Change: The whole our edge computing, but I got punky mid $20 billion market right now in 2034 and are growing it so yeah.
Mr. <unk>: Pardon me Mr. <unk>, depending on the it depends on the voice of publishing the data. Okay. Good. So I think it's a it's a phosphate patent market and that's where the market we are talking to.
Speaker Change: Okay great.
Speaker Change: Thank you very much.
Michael Cooper: Thanks, Michael.
Greg Greenberg: Our next question comes from Greg Greenberg. Please proceed with your question.
Speaker Change: Our next.
Speaker Change: Comes from Greg Greenberg. Please proceed with your question.
Greg Greenberg: Yes, can you give us an update on the radiation hardened programs, anything that happened in the last quarter, and what you see for, you know, one, two, three years from now? Thank you.
Greg Greenberg: Yes can you give us an update on our radiation hardened programs or anything that's happened in the last quarter and what you see right now.
Speaker Change: <unk> three years from now thank you sure.
Douglas M. Schirle: So, we shipped a prototype order this past quarter to a customer actually out of Europe, and so that's going to be for their ongoing testing. There are still some active programs that we have set some samples into over the last couple years, and so those are just waiting to go into production, and then there are a few others that we're still targeting. North of 90% gross margin on this product cell. You know, we're still saying that in the years ahead. It's just been, you know, as you know, if you've been on these calls in the past, it's just been a much slower process than we had ever anticipated.
Speaker Change: So we shipped our.
Speaker Change: A prototype order this past quarter to a customer actually out of Europe.
Speaker Change: And so that's going to be for their ongoing testing.
Speaker Change: There is there still some active programs that we have set some samples into.
Speaker Change: Over the last couple.
Speaker Change: A couple of years and so those are just waiting to go into production and then there are a few others that we're still targeting.
Hard to say, we've always said that we kind of are looking for the kind of the $10 million a year kind of run rate and you know again, we talked about this is north of 90% gross margin on this product. So we're still saying that in the in the years ahead. It's just been you know as you know if you've been on these calls in the past, it's just been a much slower process than we had.
Speaker Change: Ever anticipated.
Greg Greenberg: And I think you mentioned maybe a few quarters ago that you didn't need it to go up in space, or has it already been up in space? What's the status?
Speaker Change: And I think you mentioned, maybe a few quarters ago that you didn't need it to go up in space or hasn't been already up in space, what's what's the status there.
Douglas M. Schirle: Yeah, you're referring to heritage. As far as I know, we don't have heritage yet, and so we're waiting for some of these launches. I know that we're also seeing what we can do about possibly getting some parts into space just for the heritage. It would not be, this is going to sound a little strange, it's not associated with the program we're working on now, it would just be a way to test the parts in space just to prove that they actually work in those environments.
Speaker Change: So yes, you are referring to heritage yeah, so as far as I know, we don't have heritage yet and so we're waiting for some of these launches and I know that where we're also seeing what we can do about possibly getting some parts into space just for the heritage only it would not be this is going to sell a little strange.
Speaker Change: With the program. We're working on now would just be a way to exercise the parson space just to prove that they actually work in those environments. I mean, all the testing we've done which simulates the environment. It's done on Earth and so yeah. We certainly all the tests are done tells you that it will work but.
Douglas M. Schirle: All the testing we've done, which simulates that environment, is done on Earth. We certainly, all the tests are done, tell you that it'll work, but these folks want actual proof. We're looking for a mechanism now to try and get the parts up so we can have that official heritage stamp on our part.
Speaker Change: These folks want actual proof, so where we're looking for a mechanism now.
Speaker Change: To try and get the parts up so we can we can have that official heritage stamp on our parts.
Greg Greenberg: Okay, and then back to AVU. So you're still expecting a second spin. When would you expect that back?
Okay and then that's a b is so you're still expecting second spin when would you expect that back.
Douglas M. Schirle: So we're, yeah, so we're not, we're not actively spinning the part yet. So as we discussed, the first silicon looks very solid. There are some minor bugs, but they've all had software workarounds at this point.
Speaker Change: So yeah. So we're not we're not actively spending the part yet so as we discuss first silicon looks very solid there are some minor bugs they've all had.
Speaker Change: Software workarounds at this point and so as we as we continue to finish up these libraries and algorithms. We talked about we will be able to determine whether or not there are any other bugs and once that's done then we'll do the spin so as of now we're holding off on any spin.
Douglas M. Schirle: And so as we continue to finish up these libraries and algorithms we talked about, we'll be able to determine whether or not there are any other bugs. And once that's done, then we'll do the spin. So as of now, you know, we're holding off on any spins until we can identify any other minor bugs.
Speaker Change: So we can identify any other minor bugs.
Greg Greenberg: So I can read into that that strategic alternatives don't require a partner to be able to see a second spin to know what you guys have so far, correct? Correct. Yeah, the strategic alternatives
Speaker Change: So I can read into that that it's strategic alternatives. It doesn't require a partner to be able to see a second spin to know what you guys have so far correct Kurt.
Douglas M. Schirle: Correct. Yeah, the strategic partnership is more for the next generation part and also just to, you know, expand our business in general, but we won't need that for just the second span. That's correct. Okay, thank you.
Correct, Yeah the strategic.
Kurt: The partnership is more for the next generation part and also just to expand our business in general, but we won't need that for just for the second span that's correct.
Speaker Change: Okay. Thank you.
Robert Christian: Our next question comes from Robert Christian. Please proceed with your question. Yes, have you guys identified any possible companies that are interested?
Speaker Change: Our next question comes from Robert Christian. Please proceed with your question.
Robert Christian: Yes have you guys identified any possible companies that are interested in licensing your technology.
Douglas M. Schirle: So we are actually working with right now a, so this is on the customer side, not on the, you know, I'm not sure if you're talking about potential competitors or customers. So on the customer side, we do have a major networking telecom customer that is looking at our technology to be able to incorporate some of the IP into their ASIC.
Speaker Change: So we are actually working with right.
Speaker Change: Right now a.
Speaker Change: So this is on our customer side not on a you know I'm not sure. If you were talking about potential competitors or customers. So on our customer side, we do have a major.
Speaker Change: Networking telecom customer that is looking at.
Speaker Change: Our technology to be able to incorporate some of the IP into their ASIC and those are conversations we've been having for a bit you know some time now and it looks like it's getting further along there.
Douglas M. Schirle: And those are conversations we've been having for a bit, you know, some time now, and it looks like it's getting further along, you know, there. We actually started the conversations before we had Gemini 2, and obviously, Gemini 1 wasn't what they were looking for. It had to be Gemini 2 technology, and now that it's out, and once we get some of the benchmarks, then it'll progress even faster. Okay, good. And are there any other companies out there competitors that are interested in
Speaker Change: Sure.
Speaker Change: She started the conversations before we had Gemini two and.
Speaker Change: And obviously, Jim and I. One was you know what theyre looking for it to be Gemini two checked.
Speaker Change: Technology, and now that it's out and once we get some of the benchmarks.
Speaker Change: Then that'll that'll progress even faster.
Unknown Attendee: OK, good.
Speaker Change: Okay. Good and is there any other companies out there or competitors.
Unknown Attendee: And is there any other companies out there, competitors that interested in buying the company as a day is right now?
Speaker Change: Interested in buying the company as it is right now.
Douglas Schirle: Well, you know, we've been having a lot of discussions with need them, and you know, things are encouraging, but there's nothing to talk about yet.
Douglas M. Schirle: Well, you know, we've been having a lot of discussions with Needham, and things are encouraging, but there's nothing to talk about yet.
Well you know we've been having a lot of discussions.
Speaker Change: With Needham and.
Speaker Change: You know things are encouraging, but theres nothing to talk about yet.
Unknown Attendee: OK, thank you very much. Thanks, all right.
Speaker Change: Okay. Thank you very much.
Thanks Robert.
Yeah.
Speaker Change: Yeah.
Douglas Schirle: So, there are no further questions at this time. I would now like to turn the floor back over to Mr. Schirle for closing comments.
Li-Lin Hsu: It appears that there are no further questions at this time. I would now like to turn the floor back over to Mr. Hsu for closing comments.
Speaker Change: It appears there are no further questions at this time I would now like to turn the floor back over to Mr. Shiels for closing comments.
Li-Lin Hsu: Thank you all for joining us. We look forward to speaking with you again when we report our second quarter fiscal 2024 results. Thank you.
Douglas Schirle: Thank you all for joining us. We look forward to speaking with you again when we report our second quarter physical 20-20-40s.
Douglas M. Schirle: Thank you all for joining US we look forward to speaking with you again, when we do pull all second quarter physical plenty plenty for example.
Unknown Attendee: Thank you.
Thank you.
Speaker Change: Yeah.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Unknown Attendee: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. © ©
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time.
Speaker Change: Thank you for your participation.
Speaker Change: [music].
unknown: Unknown Attendee, Jeffrey Bernstein, Douglas Schirle, Nicolas Doyle, Didier Lasserre, George Gascar, Luke Bohn, GSI Technology Inc.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].