GSI Technology, Inc. Price & Performance (GSIT)

Good afternoon.

And thank you for joining us to review our 3rd quarter fiscal 2025 financial results. I'm pleased to report that our Q3 has demonstrated meaningful progress in our financial performance and ongoing initiatives with the APU Let me start with our financial highlights before diving into our product development. In the Q3, we generated revenue of 5,400,000 dollars representing a 2% increase.

Year over year and 19% sequential growth on the previous quarter. More importantly, our cost reduction initiative had begun to bear fruit resulting in a deduction in operating and net losses compared to the Q3 of fiscal 2024, Looking at our SMB business, [indiscernible] by the continued momentum in our core SME segment. Revenue growth this quarter in SME came from existing customers, resumed over at their inventory level, Romanite, and the growing asset demand from the customer for our 144 megaswand in the growth in manufacturing DD leading AI chip, We anticipate this customer becoming our largest [indiscernible] Let me share a few key developments on the APU front. So far, our APU technology is [indiscernible] we make good progress [indiscernible] Which has a manual bug, Fortunately, software workaround made the chips sufficiently functional [indiscernible] and software and the library development.

We will be able to deliver new neural network models for our Gemini 2 SBIR program with the Air Force in the March quarter [indiscernible] We are now preparing for a second spin of Gemini 2 [indiscernible] Media will provide additional details on Gemini 2 Ity's prepared comments In parallel, we have begun work on a new chip [indiscernible] Plattel will be designed to address the growing market for language models [indiscernible] with its low power features.

The chip architecture will be built on Gemini 2's architecture. We are pursuing multiple funding pathways to support this $50,000,000 development program. Including discussions with strategic and financial partners. Our government business continues to bring to multiple SBIR program. We recently launched the Phase 1 contract with the U. S. Army including 250,000 In this phase, we will explore and identify best fit applications to develop specialized edge computing AI solutions with Gemini2 This will strengthen our relationship with agency within the Department of Defense. Didier will share more details on this new win and the status of our [indiscernible] In summary, while we are encouraged our progress, we remain dedicated to disciplined execution across all areas Our improved operating efficiency [indiscernible] and strategic initiative in commercial and government markets position us well for as we continue to invest in various strategic alternatives With that, handing over to Lydia. To provide more details of our APU business opportunities. And cover the Q3 sales breakdown. Thank you, Lee Lean. As Lilien mentioned, Gemini 2 is on track for a February tape out and availability in May and we'll have a new leaderboard in June. This aligns with the milestone for the Air Force's SBIR.

Gemini 2 enhances AI capabilities with neural network models together with SAR imaging capability to target high value applications in the defense and aerospace markets. Meeting these milestones should put us in a good shape to complete algorithm development and library building for delivery by Q3 of Leveraging Gemini 2's architecture, we can accelerate the development of our next generation chip [indiscernible] with a cost effective faceted market strategy. PLADO's ultra low power design will target rapidly growing markets with the Edge and Large Language Model Solutions. PLATO is a strategic pivot from our previous plan for development excuse me, for developing a new next generation version of Gemini with a more economical and faster development path than the previously proposed 3 d Gemini 3. The distinguishing feature of Play Doh targeted for LLM market is that it can deliver data center performance levels using very low power making it suitable for use at the edge. As Lilien mentioned [indiscernible] and may also be funding sources with an expected development timeline of 12 to 18 months. I am pleased to say that our ongoing SBIR projects are on track and meeting our milestones. As a reminder, we are currently working on Phase 2 contracts with Space Development Agency and Air Force Research Labs and most recently announced a Phase 1 contract with the U. S. Army.

We are preparing to deliver a YOLO algorithm for the Air Force Research Labs in the current quarter including the benchmarks for a real time object detection application. Which stands for You Only Look Once, are algorithms that immediately determine the exact placement of objects in an image by drawing boxes around them and identifying the types of object.

Our 2nd SBIR with the Space Development Agency is waiting for the delivery of a Gemini 2 board.

As I mentioned earlier, we are on track to deliver this within the required timeframe. Today, we have received 45% of the $1,250,000 contract will receive the balance upon the Board's delivery.

We are now executing the Phase 1 for our latest win the U. S. Army contract, to determine which of the their ongoing projects would benefit from Gemini 2's capabilities. After Phase 1, we will have the opportunity to compete for Phase 2, which could be worth up to $2,000,000 The focus will be on edge computing AI solutions using Gemini 2.

Our key objectives are integration feasibility assessment and AI algorithm validation for military applications. The Army is the largest of the 5 branches of the Department of Defense and with this SBIR, we are gaining exposure to this branch. Lastly, regarding our SAR projects, there has been ongoing progress in fiscal Q3. The Asian Defense and R and D organization that we have mentioned in the past is a value in Gemini 2 for low in flight I'm sorry, low power in flight applications. We are advancing with a few more deliverables to prepare them to purchase a Gemini 2 board. This organization is also a potential funding partner for PLATO.

Also, 2 other aerospace companies are evaluating our technology for image creation and onboard satellite applications for SAR. Now I'll move to the customer and product breakdowns for the 3rd quarter. In the Q3 of fiscal 2025, sales to Nokia were $239,000 or 4.4 percent of net revenues compared to $807,000 or 15.2 percent of net revenues in the same period a year ago, and $812,000 or 17.8 percent of net revenues in the prior quarter. Military defense sales were 25% of our a year ago and 40.2% of shipments in the prior quarter. Sigmakrod sales were 39.1 percent of 3rd quarter shipments compared to 46.9 in the Q3 of fiscal 2024 and 38.6% in the prior quarter. Now I'd like to hand the call over to Doug. Go ahead, Doug.

We reported net revenues of $5,400,000 for the Q3 of fiscal 2025 compared to $5,300,000 for the Q3 of fiscal 2024. And $4,600,000 for the Q2 of fiscal 2025. Gross margin was 54% in the Q3 of fiscal 2025 compared to 55.9% in the Q3 of fiscal 2024. And 38.6% in the preceding Q2 of fiscal 2025. The sequential increase in gross margin in the Q3 of fiscal 2025 was primarily due to higher revenue products mix and severance costs associated with manufacturing workforce reductions in the prior quarter. Total operating expenses in the Q3 of fiscal 2025 were $7,000,000 compared to $9,700,000 in the Q3 of fiscal 2024 $7,300,000 in the prior quarter. Research and development expenses were $4,000,000 compared to $7,000,000 in the prior year period and $4,800,000 in the prior quarter.

Selling, general and administrative expenses were $3,000,000 in the quarter ended compared to $2,700,000 in the prior year quarter, $2,600,000 in the previous quarter. 3rd quarter fiscal 2025 operating loss was $4,100,000 compared to an operating loss of $6,700,000 in the prior year period and $5,600,000 in the prior quarter. 3rd quarter fiscal 2025 net loss included interest and other income of $70,000 a tax provision of $44,000 compared to $155,000 in interest and other income its tax provision of $71,000 for the same period a year ago. In the preceding Q2, net loss included interest and other income of $149,000 and a tax provision of $23,000 Net loss in the Q3 of fiscal 2025 was $4,000,000 or $0.16 per diluted share, compared to a net loss of $6,600,000 or $0.26 per diluted share for the Q3 of fiscal 2024 and a net loss of $5,500,000 or $0.21 per diluted share for the Q2 of fiscal 2025 Total 3rd quarter pretax stock based compensation expense was $429,000 compared to $649,000 in the comparable quarter a year ago, and $663,000 in the prior quarter. At December 31, 2024, company had 5 $15,100,000 in cash and cash equivalents compared to $14,400,000 at March 31, 2024.

Working capital was $17,900,000 as of December 31, 2024 versus 19,100,000 at March 31, 2024. Stockholders' equity as of December 31, 2024 $29,900,000 compared to $36,000,000 as of the fiscal year ended March 31, 2024. Previously, we announced comprehensive strategic review and establish a special committee of the Board to evaluate various strategic alternatives. Continue to work with Needham and Company as our strategic and financial advisor to assist in this process. Operator, at this point, we will open the call to Q and A. Thank you. We will now be conducting a question and answer session. Our first question comes from the line of Robert Christian, a Private Investor.

Please proceed with your question.

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 2?

So the algorithms we're actually writing ourselves with the folks that we have in our Israeli division. As far as a white paper that yes. So as we mentioned, the first algorithm on GEMINET-two will be the YOLO model, specifically YOLO 3. We will also be following that up with the YOLO5, but we will be publishing benchmarks when that's done, correct.

Okay. And the second question I had was, when Needham was brought on or it was announced back last year in May, it was to enhance the company valuation We're actually lower now than we were Are they the right partner?

Well, we've been working with them and They have brought us opportunities that we've been looking at and we continue to look at opportunities. I don't know that it's fair to say that they're brought in to increase the company's valuation. The intent was to find strategic alternatives to further grow the company and provide investment into the company.

I was almost positive that's what was stated in May. I could be wrong, but anyway, thank you very much. [indiscernible] Thank you. And it looks like, yes, no further questions. Therefore, I will turn the call back over to Lene Xu for closing remarks.

Thank you all for joining us.

We look forward to speaking with you again when we report our Q4 and the full year fiscal 2025 in Taw. Thank you.

Thank you. Ladies and gentlemen, this concludes today's conference. And you may disconnect your lines at [indiscernible] Thank you for your participation.