Q3 2025 GSI Technology Inc Earnings Call

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Welcome to GSI Technology's third quarter fiscal 2025 results conference call.

At this time all participants are in a listen only mode. Later, we will conduct a question and answer session at that time, we will provide instructions for those 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 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 that this conference call is being recorded today January 32025 at the request of GSI technology.

Leaving shoe: Leaving shoe the company's chairman, President and Chief Executive Officer will be hosting the call today with him are Douglas Shirley Chief Financial Officer, and DDA, and let's say vice president of sales.

Sha: Now I'd like to turn the conference over to Mr. Sha. Please go ahead Sir.

Sha: Good afternoon, and thank you for joining us to review also quota physical Atlantic a new class of Ninja resolved.

Sha: I am pleased to.

Sha: You called that also causes demonstrated meaningful progress in our financial performance and the initiative with the Apu.

Sha: Let me start with all five major highlights before.

Sha: Have you even go all caught up in film.

Sha: In the third quarter, we generated revenue of 544 million babies.

Sha: But I'd be thinking a 2% increase.

Sha: Year over year, and the 19% sequential growth from the previous quarter.

Sha: Or you can call them meet all cost reduction initiative.

Sha: It began to bear fruit, we saw the reduction in operating and net losses compared to the third quarter or physical 2024.

Sha: Looking at all it's a good thing.

Sha: I included.

Sha: The continued momentum in Hong Kong.

Sha: Revenue growth this quarter came.

Sha: Pinpoint an existing customer.

Sha: Oh, the idea of England career neighbourhood on monarch.

Sha: And according to S&P men.

Awesome, well all 144.

Sha: Who's the system I E.

Manufacturing E D, leading AI chip.

Sha: We anticipate discussing won't become all Congress and some customer physical you're talking you're talking you're fine.

Sha: Let me share a few key development, if you will for them.

Sha: So far all if you were to economically is cope with that.

Sha: D D.

Sha: We make good progress.

Sha: The gymnastics Swiss citizen quicker.

Sha: Switching had Menlo Park.

Sha: Fortunately sulfur at work along with the troops and stuff, we shouldn't be functional too cool cool pool for testing and the software and the liability film.

Sha: We will be able to deliver.

Sha: No matter what models all Jim Nyquist.

Sha: One with the Air force in the March quarter, but it's all good for Citigroup.

Sha: We are now prepared to close the consisting of a gym and a cool four months of production.

Sha: [noise] studio will provide additional detail on J Mac, who is used to prepare.

Sha: They're coming in.

Sha: In parallel we have begun to walk over to do chip plateau.

Sha: Plateau will be done towards the core market a lot you're doing with your models.

Sha: Application at the agency.

Sha: We used to go call with Fisher.

Sha: The chip architecture will be built on Gemini two is architecture.

Sha: We are pursuing mutual funds and constantly.

Sha: Proposed is $50 million of government policies.

Sha: Including discussion was so did you know if I missed your comment.

Sha: Our government business continues.

Sha: Mommy Cosby, our Poland.

Sha: We recently announced a contract with the U S Army.

Excluding 250000.

Sha: In this phase, we will if pool and identify fish.

Sha: Issues took advil specialized H computing solutions with Gemini two.

Sha: This was sitting in our relationship with agency within the Department of Defense.

Sha: Do you deal with share more details on this the deal wins and the status of all of it.

Sha: Overall soft patches.

Sha: In summary, while we are in close all progress.

Sha: We remain dedicated to disciplined execution.

Sha: Oh alias.

Sha: I'll, even poop Overachieving deficiency.

Sha: Well, yes that sale.

Sha: The initiative.

Sha: And once you're in the government market position will force go sit in the book World.

Sha: We continue to create uncertainty.

Sha: Oh geez.

Sha: Was that Oh Dear could.

Sha: To provide more details.

Sha: Good news the opportunities and copper this third quarter sales breakdown.

Lee: Thank you Lee lean.

Dean: Dean mentioned Gemini two is on track for a February tape out and availability in May and we'll have a new leader board in June this aligns with the milestone for the Air Force's S. P. I R.

Dean: Jim and I to enhance those AI capabilities with neural network models together with sorry imaging capability to target high value applications in the defense and aerospace markets.

Dean: Meeting these milestones should put us in a good shape to complete algorithm development and library building for delivery by third quarter of calendar 2025.

Dean: Leveraging German I choose architecture, we can accelerate the development of our next generation chip play doh with a cost effective faster to market strategy.

Dean: Play those ultra low power design will target rapidly growing markets for the edge and large language model solutions.

Dean: Plano is a strategic pivot from our previous plan for development of <unk>.

Dean: Scares me for developing a new next generation version of Gemini with a more economical and faster development path than the previously proposed three D. Gemini three.

Dean: The distinguishing feature play doh targeted for L. L. M market is that it can deliver data center performance levels, using very little power, making it suitable for use at the edge.

Dean: We lean mentioned, we are in discussions with potential customers, who could be initial users. It may also be funding sources with an expected development timeline of 12 to 18 months.

Dean: I am pleased to say that our ongoing S. P. A R projects are on track and meeting our milestones as a reminder, we are currently working on phase two contracts with space Development Agency and Air Force features research Labs, and most recently announced a phase one contract with the U S Army.

Dean: We are prepared and preparing to deliver a yolo algorithm for the Air Force Research labs in the current quarter, including the benchmarks for our real time object detection application as a reminder, yolo, which stands for you only look once our algorithms that immediately determined the exact placement of objects.

Dean: Didn't image by drawing boxes around them and identifying the types of object.

Dean: Our second S. P. A R with a space development agency is waiting for the delivery of a Gemini two board as I mentioned earlier, we are on track to deliver.

Dean: This within the required timeframe.

Dean: We have received 45% of the 1.25 million dollar contract and will receive the balance upon the board's delivery.

Dean: We are now executing the phase one for our latest win the U S. Army contract continued to determine which of the their ongoing projects would benefit from German I choose capabilities. After phase one we will have the opportunity to compete for phase, two which could be worth up to $2 million.

Dean: The focus will be on edge computing AI solutions using Gemini two.

Dean: Our key objectives are integration feasibility assessment and AI algorithm validation for our military applications.

Dean: Army is the largest of the five branches of the department of defense and with this S. P. A R. We are gaining exposure to this branch.

Dean: Lastly, regarding our SAR projects, there hasnt been ongoing progress in fiscal Q3, the ancient defense an R&D organization that we have mentioned in the past is a valiant Gemini two for low in flight I'm, sorry, low power and flight applications.

Dean: We are advancing with a few more deliverables to prepare them to purchase a Gemini two board. This.

Dean: This organization is also a potential funding partner for Plato.

Dean: Also two other aerospace companies are evaluating our technology for image creation and onboard satellite applications for SAR.

Dean: Now I'll move to the customer and product breakdowns for the third quarter.

Dean: Third quarter of fiscal 2025 sales to Nokia were 239000, or four 4% of net revenues compared to 807000 or 15, 2% of net revenues in the same period a year ago.

Dean: 812000, or 17, 8% of net revenues in the prior quarter.

Dean: Military defense sales were 25% of our third quarter shipments compared to 28, 2% of shipments in the comparable period, a year ago and 42% of shipments in the prior quarter.

Dean: Super Quiet sales were 39, 1% of third quarter shipments compared to $46 nine in the third quarter of fiscal 2024.

Dean: And $38 six in the prior quarter.

Speaker Change: Now I'd like to hand, the call over to Doug go ahead, Doug.

Doug: We reported net revenues of $5 $4 million for the third quarter of fiscal 'twenty to 'twenty five.

Doug: Prior to $5 $3 million for the third quarter of fiscal 'twenty, 'twenty, four and $4.6 million for the second quarter of fiscal 'twenty to 'twenty five.

Doug: Gross margin was 54% in the third quarter of fiscal 2025 compared to 55, 9% in the third quarter of fiscal 'twenty to 'twenty four.

Doug: And 38, 6% in the preceding second quarter of fiscal 2020 five.

Doug: The sequential increase in gross margin in the third quarter fiscal 2025.

Doug: Primarily due to higher revenue.

<unk> mix and severance cost associated with manufacturing workforce reductions in the prior quarter.

Doug: Total operating expenses in the third quarter of fiscal 'twenty to 'twenty, five for $7 million compared to $9 $7 million.

Doug: Third quarter fiscal 'twenty, 'twenty, four and $7 $3 million from the prior quarter.

Doug: Research and development expenses were $4 million compared to $7 million from the prior year period.

Doug: $400 in the prior quarter.

Doug: Selling general and administrative expenses were $3 million in the quarter ended December 31st 2024, compared to $2.7 million in the prior year quarter and $2 $6 million from the previous quarter.

Doug: Third quarter fiscal 2025 operating loss was $4 $1 million.

Doug: Compared to an operating loss of $6 $7 million.

Doug: Part of your periods and $5.6 million in the prior quarter.

Doug: Third quarter fiscal 'twenty to 'twenty five net loss included interest and other income of $70000.

Doug: A tax provision of $44000.

Doug: Compared to $155000 in interest and other income and a tax provision of $71000 for the same period a year ago.

Doug: The preceding second quarter net loss included interest and other income of $149000 and.

Doug: And a tax provision of $23000.

Doug: Net loss in the third quarter of fiscal 2025 was $4 million.

Doug: We're 16 cents per diluted share compared to a net loss of $6 $6 million or 26 cents per diluted share for the third quarter of fiscal 'twenty 'twenty four.

Doug: And a net loss of $5 $5 billion or 21 cents per diluted share for the second quarter of fiscal 2025.

Doug: Total third quarter pretax stock based compensation expense was $429000 compared to $649000 in the comparable quarter, a year ago and $663000 from the prior quarter.

Doug: At December 31st 2024, the company had five at $15 1 million in cash and cash equivalents compared to fortunate port 4 million at March 31st 2024.

Doug: Working capital was 17 $49 million of December 31st taught it from four versus $19 1 billion at March 31st 2024.

Doug: Stockholders' equity as of December 31st 2024 was $49 9 million compared to $36 million.

Doug: As of the fiscal year ended March 31 2024.

Doug: Previously, we announced that the company had initiated.

Doug: Comprehensive strategic review and established a special committee of the board to evaluate various strategic alternatives.

Doug: To work with Needham and company as our strategic and financial advisor to assist in this process.

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

Doug: Okay.

Doug: Thank you.

Speaker Change: We will now be conducting a question and answer session.

Speaker Change: I'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the questions.

Speaker Change: You May press star two to remove yourself.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the stock east.

Speaker Change: One moment please call for questions.

Speaker Change: Our first question comes from the line of Robert Christian Hanke private Investor.

Speaker Change: Please proceed with your question.

Speaker Change: Yes, I'd like to know is the company utilizing AI to do its algorithms and software and are we going to get a white paper on the benchmarks for the Gemini two.

Speaker Change: Yeah. So yeah, the algorithms, we're actually writing ourselves.

Speaker Change: With the folks that we have in our Israeli division.

Speaker Change: As far as a white paper that yes. So as we mentioned the first algorithm on Gemini two will be the Yolo model, specifically Yolo three we will also be falling following that up with the yellow five but we will be publishing our benchmarks when that's when that's done correct.

Speaker Change: Okay and then second question I had was when Needham was bought brought on or it was announced back last year in may it was to enhance the company valuation.

Speaker Change: Actually lower now than we were are they the right partner.

Well you know, we've been working with them and.

Speaker Change: They have brought us opportunities that we've been looking at and we continue to look at opportunities.

Speaker Change: I don't know that it's fair to say that they were brought on to increase the company's valuation the intent was to find a strategic alternatives to.

Speaker Change: Further grow the company and provide investment into the company.

Speaker Change: Why was almost positive that's what was stated in may.

Speaker Change: I could be wrong, but.

Speaker Change: Anyway, Thank you very much.

Christian: Hey, Christian.

Christian: Thank you.

Christian: I can answer your line if anyone has any questions you May press star one to John.

Speaker Change: And in effect you have no further questions I will turn the call back over to the need shoot for closing remarks.

Christian: Okay.

Christian: Thank you all for joining US we look forward to speaking with you again, when we report our fourth quarter and the full year physical in front of you from your front end, though I'm kidding.

Thank you ladies and gentlemen. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.

Christian: Okay.

Christian: Yeah.

Christian: [music].

Christian: Okay.

Christian: Mhm.

Christian: Yes.

Christian: Hum.

Christian: No.

Christian: [music].

Christian: Yeah.