In their latest earnings call, GSI Technology (NASDAQ: NASDAQ:GSIT) reported a net loss of $4.3 million for the fourth quarter of fiscal year 2024, with net revenues totaling $5.2 million. The company highlighted the launch of new low-power servers, advancements in their Gemini-II chip, and efforts to reduce AI model sizes.
GSI Technology also announced the sale and leaseback of their headquarters to boost funding and a strategic review with Needham & Company to maximize shareholder value. Despite the net loss, GSI Technology provided an optimistic outlook for the first quarter of fiscal 2025, expecting net revenues to be between $4.6 million and $5.2 million with a gross margin of 52% to 54%.
Key Takeaways
- GSI Technology reported a net loss of $4.3 million in Q4 fiscal 2024.
- Net revenues stood at $5.2 million with a gross margin of 51.6%.
- The company launched new servers, made progress on the Gemini-II chip, and worked on AI model size reduction.
- A sale and leaseback transaction of their headquarters was completed for additional funding.
- GSI Technology is engaging in a strategic review with Needham & Company.
- Anticipated Q1 fiscal 2025 revenues are between $4.6 million and $5.2 million.
Company Outlook
- GSI Technology expects Q1 fiscal 2025 net revenues to range from $4.6 million to $5.2 million.
- The company predicts a gross margin of approximately 52% to 54% for the upcoming quarter.
Bearish Highlights
- The company's net loss widened to $4.3 million in Q4 fiscal 2024 from $3.9 million in the same period the previous year.
- Fiscal year 2024 net revenues decreased to $21.8 million from $29.7 million in the previous fiscal year.
- Gross margin declined to 54.3% in fiscal year 2024, down from 59.6% in the prior year.
Bullish Highlights
- GSI Technology launched high-capacity, low-power servers.
- Progress was made in the development of the Gemini-II chip.
- Efforts to reduce AI model sizes are ongoing, indicating a focus on innovation and efficiency.
Misses
- The company's total operating expenses increased to $7.2 million in Q4 fiscal 2024 from $6.9 million in the same quarter of the previous year.
- There was a decrease in cash and cash equivalents to $14.4 million at the end of March 2024 from $30.6 million the previous year.
Q&A Highlights
- The CEO referenced a Forbes article discussing the AI industry's carbon footprint, indicating the company's awareness of environmental concerns.
- The company emphasized strategic goals for each APU generation, aiming to secure sales and strategic partnerships.
InvestingPro Insights
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InvestingPro Data highlights a market capitalization of $74.87 million, which suggests that while GSIT is a smaller player in the tech field, it has a tangible presence in the market. The company's P/E ratio stands at -3.72, reflecting its current lack of profitability. Moreover, the revenue for the last twelve months as of Q3 2024 was reported at $22.0 million, indicating a significant downturn with a -33.43% revenue growth compared to the previous period.
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Full transcript - GSI Technology (GSIT) Q4 2024:
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the GSI Technology's Fourth Quarter Fiscal 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and 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 been advised to advise you that this conference call is being recorded today May 2, 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, and Didier Lasserre, 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 (NASDAQ:TWOU) servers, integrated with the powerful Gemini-I APU designs specifically for specifically for SAR and Fast Vector Search applications. These servers can enable mobile applications, such as print and the satellite and will offer enterprise-level processing at the edge. In addition, we now have a benchmark on pay in assessing the doubles for SAR providing crucial tools for our follow-up efforts with SAR customers, SAR targets over the past year. We are finalizing marketing materials and plan to begin sales promotion to 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 spring of Gemini-II presently undergoing rigorous testing and debugging. The result showcased during the testing was significant for the integration of the chip onto evolve. Even the chip mounted on a board, has enabled comprehensive performance assessments, the chip can perform the basic functions in the processing that it is able to move data between the processing array and the AO1 and AO2 local memories. This phased like that. The insertion can be successfully executed to the embedding processor and that the database is also working. So far we are pleased with the chips result, which has been better than we anticipated. 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 before a initiated benchmarking shortly after. This could allow us to begin preliminary customer sampling with the expectation of starting our testing with targeted customers before year end along with further software development and the writing over diversity. Due to the huge model size requirements introduced by large language models, there are many efforts in the AI industry to reduce model size, low the body, panel you know they will end a bit less. Those algorithms reduce the model waste to 1 bit or 1.58 bit. Instead of assessing bit, an 8 bit in the present models, the reduced waste size reduce the memory storage requirements and simplify the competition. Thus simplify the competition especially beneficial to APU architecture over the traditional GPU architecture. GPU architecture are based on higher resolution machine 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, the sale expected to close in early June will provide additional funding to support the finalization of Gemini-II 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. We are seeking a technical panel for Gemini-III. 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 Gemini-III with high-bandwidth memory. Now, I will hand the call over to Didier, who will discuss our business performance further. Please go ahead, Didier.
Didier Lasserre: Thank you, Lee-Lean. Starting with fiscal year 2025, I would like to highlight several strategic goals and initiatives still work on with each of the APU generations. First, we aim to sustain our legacy sales at the current run rate and now with two APU servers available, we're primed to pursue Gemini-I sales particularly focused on our SaaS solution. It's our intention to achieve the first sales of Gemini-I in the second half of fiscal 2025. With Gemini-II, 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 eight times the memory density compared to Gemini-I. Gemini-II 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-II'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-III partners, including customers for the chip and technology partners for HBM integration, getting partner funding for Gemini-III 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-II, secondly, advancing -- I am sorry and securing sales for Gemini-I, invest in Gemini-II for its second iteration which will enable us to commence customer sampling later this year and then lastly, actively seeking strategic partnerships for Gemini-III. 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 (HE:NOKIA) were $694000 or 13.5% of revenues compared to $1.2 million or 21.8% of revenues in the same period a year ago and $807000 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. SigmaQuad 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. Doug, go ahead, please.
Douglas Schirle: Thank you, Didier. Before I cover the fourth quarter and full year fiscal 2024 results, I want to reference the business update that was in 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 process architecture and build a team of 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 of the company's position. Any actions taken as a result of this strategic review will be directed at driving shareholder value. The company has retained Needham & Company, LLC as our strategic and financial adviser in addressing these alternatives. There can be no assurance that this 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 a 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 appreciating third quarter. The decrease in gross margin in the fourth quarter of 2024 was primarily related due to product mix and the effect of lower revenue on the fixed costs and our cost of revenues. Total operating expenses in the fourth quarter of fiscal 2024 were $7.2 million compared to $6.9 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 in the prior year quarter and $2.7 million in the previous quarter. Fourth quarter 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. Fourth quarter fiscal 2024 net loss included interest and other income of $108,000 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. In the preceding third quarter, net loss included interest and other income of $155,000 and a tax provision of $71,000.Total fourth quarter pre-tax stock-based compensation expense was $693,000 compared to $515,000 in the comparable quarter a year ago at $649,000 in the prior quarter. For the fiscal year ended March 31, 2024, we reported a net loss of $20.1 million, or $0.80 per diluted share and net revenues of $21.8 million, compared to a 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 decrease in gross margin was primarily due to product mix and the effect of lower revenue on the fixed costs and the 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 operating loss of $15.8 million in the prior year. The 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. 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 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 point, we'd like to open the call to Q&A.
Operator: Thank you, presenters. [Operator Instructions] And presenters, I don't see any questions at this time. I would now like to turn the call to CEO, Lee-Lean 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 AI's Huge Carbon Footprint. You can find it on the Forbes website at forbes.com. We look forward to speaking with you again when we report our first quarter fiscal 2025 results. Thank you.
Operator: Thank you so much. Ladies and gentlemen, this concludes today's conference call. Thank you for listening. You may now disconnect. Have a great day.
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