Q1 2025 GCT Semiconductor Holding Inc Earnings and Business Update Call
Okay.
Operator: Good afternoon. Thank you for attending GCT Semiconductor Holding Inc.'s first quarter 2025 financial results call.
Speaker Change: Good afternoon. Thank you for attending GCT semiconductor holding inc's first quarter 2025 financial results call.
Operator: All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.
Speaker Change: All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.
Operator: Joining the call today are John Schlaefer, GCT's Chief Executive Officer, and Edmund Cheng, CFO, to discuss the first quarter 2025 agenda. During this call, certain statements we make will be forwarded to you.
Speaker Change: Joining the call today are John Schaefer G C T as Chief Executive Officer, and Edmond Chang CFO to discuss the first quarter 2025 results.
Speaker Change: During this call certain statements, we make will be forward looking these statements are subject to risks and uncertainties, including those set forth in our safe Harbor provision for forward looking statements that can be found at the end of our earnings press release and also in our Form 10-Q that will be filed today.
Operator: These statements are subject to risks and uncertainties, including those set forth in our Safe Harbor provision for forward-looking statements that can be found at the end of our earnings press release, and also in our Form 10-Q that will be filed today, which provide further detail about the risks related to our business.
Speaker Change: Further detail about the risks related to our business. Additionally.
Operator: Additionally, except as required by law, we undertake no obligation to update any forward-looking I will now turn the call over to John Schlaefer.
Speaker Change: Additionally, except as required by law, we undertake no obligation to update any forward looking statements.
Speaker Change: I will now turn the call over to John Schaefer.
John Schlaefer: Thank you and thanks to everyone for joining us today for our first quarter 2025 earnings call. I'll focus my remarks on our 5G chipset and important partnership updates within our 2025 GCT Europe 5G program and Edmund, our CFO will provide details for our first quarter financial disclosure.
John Schaefer: Thank you and thanks to everyone for joining us today for our first quarter 2025 earnings call.
John Schaefer: I'll focus my remarks on our five new chipset and important partnership updates within our 2025 Ppt Europe IV program.
Speaker Change: It had been our CFO will provide details for our first quarter financial disclosure.
John Schlaefer: And without any further delay, I am pleased to say that we've officially begun the 5G product era here at GCP. and as I used the one yard line analogy during last quarter's earnings call, we are officially in the end. As a result of our focused efforts under the 2025 GCT year of 5G program, we are currently evaluating our finalized 5G chipset in our own lab facility. This is following successful acceleration and completion of our production milestones through early May.
Speaker Change: And without any further delay I am pleased to say that we've officially begun.
Speaker Change: Quite a few product your ear at TCT.
Speaker Change: And as I use the one yard line analogy during last quarter's earnings call. We are officially in the end zone.
Speaker Change: As a result of our focused efforts under the 2025 Ppt Europe IV program. We are currently evaluating our finalized five three chipset and our own lab facilities. This is following successful acceleration of completion of our production milestones through early may.
John Schlaefer: This marks a monumental milestone for us here. binary catalyst as we are moving directly to 5G customer sampling starting this month, which will then lead to volume shipments in Q3 and beyond. And within our 2025 GCT year of 5G program, We have also further accelerated and prioritized our partnership and customer programs that are focused on Pfizer. On our last earnings call, I already mentioned that we have taken action to accelerate the ongoing announced and unannounced programs with world-renowned partners like GlobalStar, European Tier 1 telco supplier, Oramco Digital, Samsung, and Kyocera. Additionally, we have recently signed a letter of intent with Orbit North America to jointly develop and supply a mobile hotspot and FWA gateway, utilizing a Verizon certified 5G module based on our new 5G chip.
Speaker Change: This marks a monumental milestone for us here at G. C. T. A binary catalyst as we were moving directly to fight the customer sampling starting this month, which will then lead to volume shipments in Q3 and beyond.
Speaker Change: And within our 2025 GCT Euro five D program.
Speaker Change: We have also further accelerated and prioritized our partnership and customer programs that are focused on Friday.
On our last earnings call I already mentioned that we have taken action to accelerate the ongoing announced and unannounced programs with world renowned partners like Globalstar European tier, one telco supplier or input digital Samsung Kyocera. Additionally, we have recently signed a letter of intent with orbit North America to jointly develop.
Speaker Change: Supply a mobile hotspot and SWA gateway utilizing a Verizon certified <unk> module based on our new <unk> chipset.
John Schlaefer: The LOI outlines the framework for collaboration between the parties, including terms related to volume purchase, for supply to Verizon and other operators.
Speaker Change: The LOI outlines the framework for collaboration between the parties, including terms related to volume purchase for supply to Verizon and other operators before I turn the microphone over to Edmund I do want to stress again, how pivotal. This moment is for US here at GCT <unk> chipset is now becoming available and is finding its way into our.
John Schlaefer: Before I turn the microphone over to Edwin, I do want to stress again how pivotal this moment is for us here at GCT. The 5G chipset is now becoming available and is finding its way into our customers' products. And while we expect certain use cases to continue to benefit from our advanced 4G solutions, we are fully focused on driving sales for our 5G chipsets.
Speaker Change: Customers products and while we expect certain use cases to continue to benefit from our advanced <unk> solutions. We are fully focused on driving sales for our <unk> chipsets and expect Edmund to have a very different story to tell regarding our income statements and our future earnings calls and with that Edmond.
John Schlaefer: And I expect Edwin to have a very different story to tell regarding our income statement in our future earnings calls.
Edmund Cheng: Thank you, John. As John said, we are incredibly excited about the impact 5G will have to our company and specifically to our income statement and balance sheet starting from the second half of the year. In the meantime, and until we see that impact coming through, I want to remind all listeners that we are reporting the transitional 4G results. They are not in all representative of what we are expecting in the second half of the year. once 5G chipset sales are occurring. We anticipate that the average selling price of our 5G chipset will be approximately four times higher than that of our current 4G offering.
Edmund: Thank you John as John said.
Speaker Change: Credit would be excited about the impact <unk> will have to our company specifically to our income statement and batteries sheet.
Edmund: From the second half of the year.
Edmund: In the meantime, and until we see that impact coming through I want to remind all listeners that we are reporting that transition reported results.
Edmund: All representative of what we are expecting in the second half of the year.
Edmund: Right Okay.
Edmund: Correct.
Edmund: Anticipate that the average selling price of our <unk> chipset will be approximately four times higher than that.
Edmund: Operator.
Edmund Cheng: As we focus on sampling and launching our 5G chipset, we have fully aligned our internal resources with this strategic priority, including our marketing and sales teams' focus on new business development activities in building the potential pipeline.
Edmund: As we focus on sampling and launching our <unk> chip that.
Edmund: We have fully aligned our internal resources.
Edmund: Strategic priority, including our marketing and sales team focused on new business development activity.
Edmund: What is the potential pipeline.
Edmund Cheng: Turning now to our first quarter 2025 financial results. Further details can be found in the thank you that will be on file with the SEC. Net revenues decreased by $2.8 million, or 85%, from $3.3 million for the three months ended March 31, 2024, to $0.5 million for the three months end March 31, 2025. The reduction was primarily attributable to a decrease of $2.3 million in product sales and a decrease of $0.5 million in service revenue. The decrease was due to no 5G platform shipments in the first fiscal quarter of 2025 as compared to two 5G platform shipments in the first fiscal quarter of 2024, which account for the most of the differences.
Edmund: Turning now to our first quarter 2025 financial results further details can be found in the 10-Q that will be on file with the SEC.
Edmund: Net revenues decreased by $2 8 million or 85% from three 3 million for the three months ended March 31 2034.
Edmund: <unk> 5 million for the three months and March 31 2025.
Edmund: Reduction.
Edmund: It's primarily attributable to a decrease.
Edmund: $2 3 million in product sales and a decrease of $5 million.
Edmund: Revenue.
Edmund: The decrease was due to no part D platform shipment in the FERC.
Edmund: Quarter of 2025.
Edmund: Compared to two five D platform shipments in the first fiscal quarter of 2010, before which account for most of the differences.
Edmund Cheng: Again, we're monitoring our expected upcoming 5G revenue. We will be benefited from both higher global market demand and market prices in the 5G chip market. The cost of net revenues decreased by 0.9 million, or 69%, from 1.3 million for the three months ended March 31st, 2024, to 0.4 million for the three months ended March 31st, 2025. This decrease in the cost of net revenue was driven primarily by the reduction of our product sales and involvement in service projects. Once our 5G chipset has been launched, we expect new service revenues in terms of NRE in assisting our customers in their product development projects in using our 5G chipset.
Again, we're modeling our expected upcoming part D revenue.
Edmund: Will it be benefited from both higher global market demand and market prices in the private market.
Edmund: Net revenues decreased by $2 9 million or 59% from $1 3 million for the three months ended March 31.
Edmund: 34.
Edmund: <unk> 4 million for the three months ended March 31 2035.
Edmund: This decrease in the cost of net revenues.
Edmund: Was driven primarily by the reduction of our product sales and Embarkment as every project.
Edmund: One is RFID chips that have been launch.
Edmund: Near surface revenue in terms of an R E.
Edmund: <unk> our customers in their product development projects in using our <unk> chipset.
Edmund Cheng: Our gross margin decreased to 18% for the three months and March 31st, 2025, from 60% for the three months and March 31st, 2024. The gross margin for our service business was at 15.4%. This gross margin for our product sales was at negative 120%, mainly due to the low volume of product sales, which cannot cover the overhead cost. Our growth margin is distorted by the low volume of product sales which makes it less indicative of the underlying profitability of our future product sales.
Edmund: Gross margin decreased to 18% for the three months ended March spread.
Edmund: To about 25.
Edmund: 60% for the three months ended March 2020 for the gross margin for our survey work.
Edmund: At 54% this growth market for our products both at negative 120%, mainly due to the lower volume of product sales, which cannot cover the overhead costs.
Edmund: Our gross margin.
Thoughts there.
Edmund: Low volume.
Edmund: Our product sales mix.
Edmund: <unk> indicated all the underlying profitability of our future product sales.
Edmund Cheng: Thank you especially for the upcoming 5G product. Nevertheless, we are actively exploring measures to improve operational efficiency and look forward to restoring product sales and service project volume with 5G. Research and development expenses decreased by $1.4 million, or 26%, from $5.5 million for the three months ended March 31, 2024, to $4.1 million for the three months ended March 31, 2025. This decrease was primarily due to $1.3 million related to project-specific intellectual property expenses. incurred during the first fiscal quarter of 2020. Sales and marketing expenses increased by 0.1 million or 12% from 1 million for the three months and March 21st, 2024 to 1.1 million for the three months and March 21st, 2025.
Edmund: Especially for the upcoming five key product.
Edmund: Nevertheless, we are actively exploring measures to improve operational efficiency.
Edmund: Look forward to restoring product sales as every project we have.
Edmund: Right.
Edmund: Research and development expenses decreased by $1 4 million.
Edmund: 26% from $5 5 million for the three months ended March 31st two.
2024 to $4 1 million for the three months ended March 31 2025.
This decrease was primarily due to one 3 billion related to projects.
Edmund: Intellectual property expenses.
Edmund: Incurred during the first fiscal quarter of 2024.
Edmund: Sales and marketing expenses decreased by <unk> 1 million or 12% from $1 billion for the three months ended March 2034 to $1 1 million for the three months ended March.
2025.
Edmund Cheng: This increase was primarily due to personnel related and other costs. General and administrative expenses decreased by 0.2 million, or 8%, from $2.8 million for the three months ended March 31, 2024, to $2.6 million for the three months ended March 31, 2025. This decrease was primarily due to a $0.7 million reduction in stock-based compensation related to the vesting of performance-based funder shares in the first fiscal quarter of 2024. partially offset by a $0.3 million increase in business liability insurance premiums and $0.2 million increase in personnel related costs driven by our transition to public company operations during the first fiscal quarter of 2024.
Edmund: This decrease was primarily due to.
Edmund: Personnel related and other costs.
Edmund: General and administrative expenses decreased by <unk> 2 million or 8% from $2 8 million for the three months ended March further.
Edmund: 2024 to two 6 million for the three months ended March 31 2035.
Edmund: This decrease was primarily due to a seven.
7 million reduction in stock based compensation related to the vesting of performance based upon this shift in the first.
Edmund: <unk> quarter of 2034.
Edmund: Australia offset by a <unk> 3 million increase in liability insurance premiums and third continue to increase in personnel related costs driven by our vision to public company operations during the first fiscal quarter of 2034.
Edmund Cheng: We've closed the quarter with cash and cash equivalents of $1 million. We also have net accounts receivable of $4.5 million and net inventory of $3.1 million. As we advance towards securing external financing, our recently filed shelf registration providing up to $200 million in capacity, including a $75 million at the market facility. which will significantly enhance the company's financial flexibility and expand our available funding opportunities.
Edmund: We closed the quarter with cash and cash equivalents of $1 million.
Edmund: We also had net accounts receivable of $4 5 million and net inventory of $3 1 million.
Edmund: As we advance towards the carry external financing our recently filed the shelf registration, providing up to $200 million in capacity, including a $75 million at the market facility.
Edmund: Richard will significantly enhance the company's financial stability.
Edmund: Bank available funding options.
John Schlaefer: With this, I will turn it back over to John.
Edmund: With this I will turn it back over to John.
John Schlaefer: Thanks, Ed. In closing, we are thrilled about what is With the announcement of our 5G chipset availability under our 2025 GCT year 5G program, we are in the final stages of putting the product, customer and financial building blocks in place for substantial growth based on our 5G chipset. and are excited about the impact of that for our company and for our stock as we value all of our shareholders.
John Schaefer: Thanks Edwin.
Speaker Change: Closing, we are thrilled about what is ahead of us with the announcement of our <unk> chipset availability under our 2025 GCT <unk> program.
Speaker Change: We are in the final stages of putting the product customer and financial building blocks in place for substantial growth based on our <unk> chipset launch.
Speaker Change: And are excited about the impact of that for our company and for our stock as we value all of our shareholders.
John Schlaefer: Finally, I would like to thank our employees, partners, and our customers for their continued efforts and dedication to the company, which ultimately drives our success as an organization. Together, we are focused on driving innovation, supporting the global transition to 5G solutions, and delivering strong, profitable growth.
Speaker Change: Finally, I would like to thank our employees partners and our customers for their continued efforts and dedication to the company, which ultimately drives our success as an organization together, we are focused on driving innovation supporting the global transition to <unk> solutions and delivering strong profitable growth.
John Schlaefer: We are entering a new phase here at GCT and are thrilled to have you with us.
Speaker Change: We are entering a new phase here at GCT and are thrilled to have you with US I will now turn the call back over to the operator, who will assist us in taking your questions.
Operator: I will now turn the call back over to the operator who will assist us in taking your call.
Operator: As a reminder, if you'd like to ask a question at this time, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster.
Speaker Change: As a reminder, if you'd like to ask a question at this time. Please press star one one on your telephone.
Speaker Change: Great for your name to be announced.
Speaker Change: To withdraw your question. Please press star one again.
Speaker Change: Please standby, while we compile the Q&A roster.
Craig Ellis: Our first question comes from Craig Ellis with B. Reilly Security. Thanks, team, for taking the questions and congratulations on continued 5G progress.
Speaker Change: Our first question comes from Craig Ellis with B Riley Securities.
Speaker Change: Thanks team for taking the questions and congratulations on continued progress.
John Schlaefer: John, I wanted to start just by following up on one of the newer announcements that the company's made, the announcement with Orbic on the 5G mobile hotspot for Verizon. Can you just talk a little bit more about how that relationship will proceed going forward and what you would expect for the second half of 2025 and 2026, even at a high level for what might be possible in terms of what you'd be able to do with that partnership and what you'd be able to ship. Yeah, thanks Craig. Yeah, so we're excited about the the ORBIC relationship.
Speaker Change: John I wanted to start just by following up on.
Speaker Change: One of the newer announcements that the companies may be.
Speaker Change: The announcement with <unk> mobile hotspot for Horizon can you just talk a little bit more about how that relationship will proceed going forward than what you would expect for the second half of 'twenty five 'twenty six even at a high level for what might be.
Speaker Change: Hospital in terms of.
Speaker Change: What you'd be able to do with that partnership and what you'd be able to ship.
Craig Ellis: Yes, Thanks, Craig.
Speaker Change: Yes. So we're excited about the orbit relationship as you know there.
John Schlaefer: As you know, they're a major supplier into Verizon right now in the here. Space. and we expect. part of that actually going forward. plan, and not just for Verizon. they have do working with other operators around the world, so I think that will be sampling them as part of the activities for this quarter, and then they'll go through their normal... process of implementing that in their device. We'll be working with them. I think we mentioned in our announcement that this will be module base, so we'll go through the process of actually providing them a module that we'll work on together.
Speaker Change: A major supplier into horizon right now.
Speaker Change: In the.
Speaker Change: Mid tier space.
Speaker Change: And we expect to be.
Speaker Change: Part of that actually going forward so that.
Speaker Change: And not just for Verizon, but.
Speaker Change: Do you have.
Speaker Change: They are working with other operators around the world. So I think that the.
Speaker Change: We'll be we'll be sampling them as part of the.
Speaker Change: The activities for this quarter.
Speaker Change: And then they'll go through their normal.
Speaker Change: Process.
Speaker Change: Of implementing that in there and theyre device will be working with them.
Speaker Change: I think we mentioned in our announcement that.
Speaker Change: This will be.
Speaker Change: Module base. So we'll go through the process of actually providing them.
Speaker Change: Jewel that we'll work on.
John Schlaefer: and also we'll be working. Hotspot, and FWA. and so forth, multiple operators. We're going to have to take this a step at a time. I don't want to get over our skis here, but we're very excited about this as we go. half of the year and Yeah, so the bottom line, though, is that this is something that's multi product and looks like it can be multi region for you. So without specifying specific volume numbers, there's a number of angles that the company can engage with the product set with this one partner.
Speaker Change: Together.
Speaker Change: And also we'll be working on.
Speaker Change: Hotspot and FWS gateway.
Speaker Change: So for.
Speaker Change: Multiple operators so.
Speaker Change: We're going to have to take this a step at a time I don't want to get over our skis here, but we're very excited about this as we go into it.
Speaker Change: Second half of the year end.
Speaker Change: 2026.
Speaker Change: Yes, so the bottom line, though is that this is something thats multi product and looks like it can be multi region for you. So.
Speaker Change: Specifying.
Speaker Change: Specific volume numbers, there's a number of bank goals that the company can engage with the product set with this one partner.
John Schlaefer: Moving on and, oh, well, that was just my reflection back, John. Yeah, yeah, I agree with you. Yeah.
John Schaefer: Im sorry, John.
Speaker Change: Yes.
Speaker Change: That was just my reflection back China, yes.
Speaker Change: Yes.
John Schlaefer: So moving on, can you talk a little bit more about the sampling that commences in the second half of this quarter for 5G? It sounds like Orbic may be one of the entities, but any color there? And then related to that, I think the company conveyed that we'll be moving into commercial shipments in the second half of the year.
Speaker Change: Yes.
Speaker Change: So moving on can you talk a little bit more about the sampling that commences in.
Speaker Change: The second half this quarter for <unk> it sounds like.
Speaker Change: Or maybe one of the entities, but any color there.
Speaker Change: Then related to that I think the company conveyed that we'll be moving into commercial shipments in the second half of the year can you talk a little bit more about the breadth that activity.
John Schlaefer: Can you talk a little bit more about the breadth of that activity and what we can expect? Yes, so we've been talking about our work with our Alpha customers for a long time and we've done announcements about that. about those engagements over the last six months. So there's six. six customers that are particular that we'll be sampling first as primary activities and then very shortly after that, and even in this quarter, there'll be... There will be others that we'll be sampling. And then, again, each one is going to have their own product focus. Each one is going to have their own schedule.
Speaker Change: And what we can expect.
Speaker Change: Yes so.
Speaker Change: We've been talking about.
Speaker Change: Our work with with our alpha customers for a long time and we've been announcements.
Speaker Change: About that.
Speaker Change: Those engagements over the last six months. So there is there is there is six.
Speaker Change: Six customers that are.
Speaker Change: <unk> that we'll be sampling first.
Speaker Change: Actually primary activities and then.
Speaker Change: Very shortly after that and even in this quarter there'll be.
Speaker Change: There'll be others that will be sampling.
Speaker Change: And then again each one is going to have their own their own product focus each one is going to have their own schedule.
John Schlaefer: And so we'll be working with as many as we can, as fast as we can, you know, to move forward into the second half of the year.
Speaker Change: And so we'll be working with as many as we can as fast as we can.
Speaker Change: Move forward into the second half and then beyond that.
John Schlaefer: Yeah, sounds good.
Speaker Change: Yes sounds good and then.
Craig Ellis: And then two more for me.
John Schlaefer: First one's probably more for you, the second one probably for Edmund. As you get ready for the volume ramp in the second half of the year, obviously you've had a supply chain in place for some time, but now we're tuning the knobs a little bit as we get ready for 5G. How are you feeling about your supply chain's capability to move into volume production around the corner? I think we've been doing this with 4G for a long time now, so this is just a different product on the same supply line and the same relationship, so I think that our supply partner We're ready for this.
Speaker Change: Two more for me.
Edmund: First one is probably more for you second one probably for Edmund.
Speaker Change: As you get ready for the volume ramp in the second half of the year.
Speaker Change: Obviously, you've had a supply chain in place for some time, but now we're turning the knobs a little bit as we get ready for <unk>. How are you feeling about your supply chain capability to move into volume production around the corner.
Speaker Change: Hi.
Speaker Change: Sure.
Speaker Change: This is we've been doing this with <unk> for a long time now. So this is just a different product on the same supply line.
Speaker Change: At the same relationship so I think that our supply partners.
Speaker Change: Ready for this.
John Schlaefer: are very excited about this as well.
Speaker Change: Andrew.
Speaker Change: We are excited about this as well.
John Schlaefer: Great.
Craig Ellis: And then lastly, Edmund, for you, helpful color as you went through the income statement, especially with some of the specifics in OPEX. As we think about the general arc of things as we move into more intensive sampling and then volume shipments, anything that we should have our eye on with the OPEX line items in 2Q or the second half of the year?
Speaker Change: Great and then lastly, admin for you.
Speaker Change: Thats helpful color as you went through.
Speaker Change: The income statement, especially with some of the specifics in Opex.
Speaker Change: We think about that general are kept things as we move into more intensive sampling in and then volume shipments.
Speaker Change: The thing that we should have our eye on with the Opex line items in <unk>, the second half of the year. Thanks team.
Edmund Cheng: Thanks, team. Okay, thank you for the question. As we look into the second half of the year and looking at our OPEX line, we don't expect our OPEX will run up the same type of scale as what our revenue will be in the second half.
Speaker Change: Alright, great.
Speaker Change: Thank you for the question.
Speaker Change: As we look into the second half of the year looking at our Opex line, we don't expect our Opex run that same type of scale as revenue.
Speaker Change: Revenue will be in the second half so.
Edmund Cheng: So at this point of time, most of the major investment in R&D has been done in a 5G chip. So we will be running the cost as we usually will do from that sense, and we have a very tight control process, cost control process.
Speaker Change: At this point of time.
Speaker Change: Most of the major investment in R&D has to be.
Speaker Change: Tom.
Speaker Change: So we will be running the costs as we usually do from that sense and we have a very tight control process cost control process in place.
Speaker Change: Got it thank you.
Operator: As a reminder, if you'd like to ask a question at this time, please press star 11 on your touchtone. I'm showing no further questions in queue at this time.
Speaker Change: As a reminder, if you'd like to ask a question at this time. Please press star one one on your Touchtone phone.
Speaker Change: I am showing no further questions in queue. At this time that will conclude today's question and answer session.
Operator: That will conclude today's question and answer session.
Speaker Change: Thank you for joining us that concludes our first quarter 2025 conference call a replay will be available for a limited time on our website later today.
Operator: That concludes our first quarter 2025 conference call. A replay will be available for a limited time on our website later today.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].