Q4 2024 GSI Technology Inc Earnings Call

Participants

Lee-Lean Shu; Chairman of the Board, President, Chief Executive Officer; GSI Technology Inc

Didier Lasserre; Vice President - Sales; GSI Technology Inc

Douglas Schirle; Chief Financial Officer; GSI Technology Inc

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the GSI Technology's fourth quarter fiscal 2024 financial results conference call. (Operator Instructions)
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 been advised to advise you that this conference call is being recorded today, May second, 2024 at the request of GSI Technology Hosting the call today is Lee-Lean Shu, the Company's Chairman, President and Chief Executive Officer. With him are Douglas Schirle, Chief Financial Officer, ended the year with their Vice President of Sales.
I would like to turn the conference over to Mr. Shu. Please go ahead, sir.

Lee-Lean Shu

Good afternoon, and thank you for joining us today. Let's start with some highlights from our first quarter activities during the quarter. And subsequently, we achieved significant milestones across our key initiatives. First, we launched two high-capacity, low-power 1U and 2U servers, integrated with the powerful Gemini one APU designs, specifically foresaw in the fast vector search applications. These servers can enable mobile applications such as print and the satellite and will offer enterprise they were processing at age.
In addition, we now have a benchmark on pay in assessing the doubles foresaw, providing crucial tools for our follow-up efforts with our customers staff targets over the past year, we are finalizing marketing materials and plan to begin sales ForMotion. We target the customers by the end of second quarter, second calendar year to year quarter.
Second, we made considerable progress which shifts from the first string of Gemini two presently undergoing rigorous testing and the parking retail showcased during the testing was significant for the integration of the chip onto evolve evidence chip Monday, ownable has enabled comprehensive performance assessments, the chip can perform the basic functions in the processing coal base, able to move data between the processing array and the AO. and NAO. two, local memory.
This phased by that Sachin can be successfully executed to the embedded processor and data Telepass is also working so far. We are pleased with the chipset resolve. Krish has it been better than we anticipated. We we end to conclude the phase by the end of calendar Q2 and then pause closely with second spin.
We anticipate receiving the next chip by for a initiated benchmarking shortly after this could allow us to begin preliminary customer sampling with the expectation of starting off our testing with target customers before year end, along with furthered further software development and the writing over diversity due to the huge model science requirements introduced by larger than which models they are many efforts in the in the in the air industry to reduce model size?
No, the body panel in Europe, you know, they will end a bit. That knows our reasons reduced the model ways to one pit or 1.58 bit. Instead of assessing that and a bit in the present model to reduce the waste side, we believe the memory storage requirements and simplify the computation first and provide the competition is especially beneficial to APU architecture over the traditional GPU architecture GPU architecture.
Our pace of hybrid solution made some modification 400 patient days ago for hybrid solution model size, however, feedlot and the BLM, you have pooling operations and individual edition for computation, you still were made to modification. Apu architecture has supporting operation and the individual edition of us the basic building blocks then means that APU is well-suited for this candle is kind of our present and offers are the venues for higher performance and lower power.
Our plan was similar to is to target this algorithm and demonstrate to users of payment and a bit less than a few can fit a small models entirely into the chip for ag applications. We expect to begin this demonstration mode index during the year once the mixing of the chip becomes available.
Another important developments since the close of Q4 due to sale and leaseback of our headquarters in San Mateo, California sale expected to close in early June will provide additional funding to support the finalization of Gemini two and other R&D projects, plus our ongoing engagement. We see the hyperscales continue to show promise. We have received great feedback on how we use or we need to focus on.
So we start to discuss the design and application for forgiveness sorry, we are seeking a technical panel, 40 immunoassay. We are pleased with the progress we have made in our conversations with some potential partners who could provide technology to support the functionality of the MSC with high-bandwidth memory.
Now I will hand the call over to Tom to Dee Dee, who will discuss our business performance.

Didier Lasserre

Further critical HDD, particularly starting with fiscal year 2025, I would like to highlight several strategic goals and initiatives still work on with each of the a few generations. First, we aim to sustain our legacy sales at the current run rate and now with two AP servers available, we're primed to pursue Gemini one sales, particularly focused on our SaaS solution. It's our intention to achieve the first sales of Gemini one in the second half of fiscal 2025 with Gemini two, we are actively writing libraries to develop new applications on the edge or near edge.
The second generation of our APU brings significant performance enhancements with more than 10 times the processing power with 8 times the memory density compared to Gemini one Gemini to offer substantial processing capabilities being suitable for both low-power data center expansion and enabling data center functions at the edge. This empowers local execution of computational intensive tasks, increasing the edge application capabilities like advanced driver assistance systems for automobiles and HPC. and delivery drones, autonomous robots, unmanned aerial vehicles and satellites.
Additionally, Gemini two's memory can hold a small database of potential door-opener for enhanced performance in several applications. One example could be an off-the-shelf facial recognition solution, potentially in hardware with on-prem software or SaaS this fiscal year.
We are highly committed to further engaging with potential Gemini three partners, including customers for the chip and technology partners for HBM integration, getting partner funding for Gemini three development is also a key priority in addition, I am pleased to share that we ship parts for a new prototype for a European Space Agency robotics space mission to intercept a comment before I conclude, I'd like to emphasize the key objectives, the GSA that the GSI team and I are actively pursuing first securing sales for Gemini two.
Secondly, advancing Chairman, I am sorry, and securing sales for Gemini one invest in Gemini two for its second iteration, which will enable us to commence customer sampling later this year.
And then lastly, actively seeking strategic partnerships for Gemini three, achieving these objectives will build awareness of the APU brand, improve our financial standing and position us to enter large high-growth markets related to AI.
Let me close with the customer and product breakdown for the fourth quarter fiscal 2024, sales to Nokia were $694,000 or 13.5% of revenues compared to $1.2 million or 21.8% of revenues in the same period a year ago and $807,000 or 15.2% of net revenues in the prior quarter. Military defense sales were 35.5% of fourth-quarter shipments compared to 44.2% of shipments in the comparable period a year ago and 28.2% of shipments in the prior quarter. Second quarter sales were 42.4% of fourth quarter shipments compared to 46.3% in the fourth quarter of fiscal 2023 and 46.9% in the prior quarter.
I'd like to hand the call over to Doug, go ahead, please.

Douglas Schirle

Take a period before I cover the fourth quarter and full year fiscal 2024 results. I want to reference the business update that was an earnings release issued today after the market closed in the press release, we announced that we have initiated a broad strategic review to maximize stockholder value. The review will be administered by a special committee of the Board of Directors to bring focus on strategic alternatives.
While the company's management focuses on the development of its family of compute and memory solutions for high-performance computing and artificial intelligence. The Company plans to consider a wide range of options, including equity or debt financing, divestiture of assets, technology, licensing or other strategic arrangements, including the sale of the Company.
Over the course of the last eight years, the company has invested approximately $150 million of internally generated capital to develop its novel associative processing process architecture and built a team of approximately approximately 80 engineers and hardware and software development. The Company's Board of Directors is of the opinion that the market has yet to recognize the progress and promise the Company's position and the actions taken as a result of the strategic review we have directed at driving shareholder value.
The Company has retained Needham & Company LLC as our strategic and financial advisory in addressing these alternatives, there can be no assurance that the strategic review process will result in the completion of any transaction. The company has not set a timetable for completion of the strategic review process at this time.
Turning to the fourth quarter results, we reported net loss of $4.3 million or $0.17 per diluted share on net revenues of $5.2 million for the fourth quarter of fiscal 2024 compared to a net loss of $4 million or $0.16 per diluted share on net revenues of $5.4 million for the fourth quarter of fiscal 2023 and a net loss of $6.6 million or $0.26 per diluted share on net revenues of $5.3 million for the third quarter of fiscal 2024.
Gross margin was 51.6% in the fourth quarter fiscal 2024 compared to 55.9% in both prior year end and the preceding third quarter. The decrease in gross margin in the fourth quarter of 2024 was primarily related to due to product mix and the effect of lower revenue and the fixed costs of our cost of revenues. Total operating expenses in the fourth quarter of fiscal 2024 for $7.2 million, $36.9 million in the fourth quarter fiscal 2023 and $9.7 million in the prior quarter. Research and development expenses were $4.8 million compared to $5 million in the prior year period and $7 million in the prior quarter.
Selling, general and administrative expenses were $2.4 million in the quarter ended March 31, 2024, compared to $1.9 million from the prior quarter and $2.7 million in the previous quarter. Q4 fiscal 2024 operating loss was $4.5 million compared to an operating loss of $3.9 million in the prior year period and an operating loss of $6.7 million in the prior quarter.
Q4 fiscal 2024 net loss included interest and other income of $100,000 and a tax benefit of $85,000 compared to $101,000 in interest and other income and a tax provision of $191,000 for the same period a year ago. From the preceding third quarter, net loss included interest and other income of $155,000 and a tax provision of $71,000.
Total fourth quarter pretax stock-based compensation expense was $693,000 compared to $515,000 in the comparable quarter a year ago and $649,000 in the prior quarter. For the fiscal year ended March 31, 2024, we reported net loss of $20.1 million, or $0.80 per diluted share. Net revenues were $21.8 million compared to net loss of $16 million or $0.65 per diluted share on net revenues of $29.7 million in the fiscal year ended March 31, 2023.
Gross margin for fiscal 2024 was 54.3% compared to 59.6% in the prior year. The increase and the decrease in gross margin, it was primarily due to product mix and the effect of lower revenue on the fixed costs in our cost of revenues.
Total operating expenses were $32.3 million in fiscal 2024 compared to $33.5 million in fiscal 2023. Research and development expenses were $21.7 million compared to $23.6 million in the prior fiscal year.
Selling, general and administrative expenses were $10.6 million compared to $9.9 million in fiscal 2023. The decline in research and development expenses was primarily due to cost reduction measures announced by the company in November 2022. Total operating loss for fiscal 2024 was $20.4 million compared to an operating loss of $15.8 million in the prior year.
Fiscal 2024 net loss included interest and other income of $414,000 and a tax provision of $70,000 compared to $202,000 in interest and other income. The tax provision of $372,000 in the prior year. At March, we had $14.4 million in cash and cash equivalents compared to $30.6 million in cash, cash equivalents and short-term investments at March 31, 2023, working capital was %19.1 million as of March 31, 2024 versus $34.7 million at March 31, 2023, with no debt and stockholders' equity as of March 31, 2024 was $36 million compared to $51.4 million as of the end of the fiscal year ended March ended March 31, 2023.
Concluding with the outlook for the first quarter of fiscal 2025, we anticipate net revenues in the range of $4.6 million to $5.2 million, with gross margin of approximately 52% to 54% operator. At this call, we'd like to open the call to Q&A.

Question and Answer Session

Operator

(Operator Instructions)
I don't see any questions at this time. I would now like to turn the call to reveal the shu for closing.

Lee-Lean Shu

Thank you all for joining us. Please check out my recent published article in Forbes, the untold story of a huge carbon footprint. You can find it on the website at ford.com. We look forward to speaking with you again when we report our first quarter fiscal 2024 results. Thank you.

Operator

Yes, thank you so much. Ladies and gentlemen, this concludes today's conference call. Thank you for listening, and you may now disconnect and have a great day.