GSI Know-how , Inc. (NASDAQ:) supplied an replace on its monetary and operational progress throughout its third-quarter fiscal 2024 earnings name. The corporate reported a internet lack of $6.6 million on internet revenues of $5.3 million, with a gross margin standing at 55.9%. Regardless of the loss, GSI Know-how highlighted vital developments in its product growth, significantly within the Gemini line of processors. The finished radiation-hardened testing of the Gemini-I APU and the anticipation of sampling Gemini-II within the second half of 2024 have been notable achievements. Trying forward, the corporate expects This fall internet revenues to be between $4.8 million and $5.4 million, with a gross margin of roughly 55% to 57%.

Key Takeaways

• GSI Know-how accomplished radiation-hardened testing for the Gemini-I APU.
• The corporate is engaged with satellite tv for pc firms for its radiation-tolerant APUs.
• Gemini-II, with improved efficiency and decrease prices, is ready to start sampling in H2 2024.
• A internet lack of $6.6 million was reported on internet revenues of $5.3 million for Q3.
• Gross margin for Q3 was 55.9%; This fall gross margin is projected to be between 55% and 57%.
• GSI Know-how shipped radiation-hardened SRAMs to 2 clients and acquired a $1.1 million contract.
• The corporate is in early levels of creating the next-generation Gemini-III chip.
• Working bills elevated because of increased R&D prices, contributing to an working lack of $6.7 million.
• The corporate is exploring funding alternatives, together with joint ventures and asset gross sales.

Firm Outlook

• Anticipated This fall internet revenues vary from $4.8 million to $5.4 million.
• Projected This fall gross margin between 55% and 57%.
• Ongoing growth of next-generation Gemini-III chip.
• Exploring funding choices and strategic partnerships for product growth.

Bearish Highlights

• Web lack of $6.6 million in Q3, with working lack of $6.7 million.
• Complete working bills have elevated, primarily because of increased R&D bills.
• Working capital has decreased in comparison with the earlier 12 months.

Bullish Highlights

• Profitable completion of radiation-hardened testing for Gemini-I APU.
• Gemini-II anticipated to supply vital efficiency enhancements at decrease prices.
• Secured a $1.1 million SBIR Direct-to-Part II contract.
• Shipped radiation-hardened SRAMs to 2 clients, indicating progress in product adoption.

Misses

• Web loss and working loss reported for Q3.
• Lower in working capital from the earlier 12 months.

Q&A Highlights

• Prototype satellite tv for pc elements shipped, together with one valued at $500,000, with launches anticipated in H2 2025.
• The corporate might obtain provenance from one of many prototype gadgets.
• Contract producers for Nokia (HE:) skilled stock burn; nevertheless, the 12-month rolling forecast stays constant.
• Income from Nokia routers is predicted to be round $1 million to $1.1 million per quarter.
• Exploring partnerships and licensing for Gemini-III and in-memory processing know-how.

InvestingPro Insights

GSI Know-how, Inc. (GSIT) has been navigating a difficult monetary panorama, as mirrored of their latest earnings name. For buyers looking for a deeper understanding of the corporate’s place, InvestingPro gives key metrics and insights that would show invaluable.

InvestingPro Information reveals a market capitalization of $48.79 million, underscoring the corporate’s modest measurement throughout the semiconductor business. The damaging P/E ratio of -2.48, adjusted to -2.93 for the final twelve months as of Q2 2024, signifies that GSIT is presently unprofitable. Moreover, the income decline of -33.28% throughout the identical interval highlights the corporate’s struggles in rising its high line.

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Full transcript – GSI Know-how (GSIT) Q3 2024:

Operator: Girls and gents, thanks for standing by. Welcome to GSI Know-how’s Third Quarter Fiscal 2024 Monetary Outcomes Convention Name. Right now, all contributors are in a listen-only mode. Later, we are going to conduct a question-and-answer session. At the moment, we are going to present directions for these focused on getting into the queue for the Q&A. Earlier than we start in the present day’s name, the corporate has requested that I learn the next secure harbor assertion. The issues mentioned on this convention name might embrace forward-looking statements relating to future occasions and the longer term efficiency of GSI Know-how that contain dangers and uncertainties that would trigger precise outcomes to vary materially from these anticipated. These dangers and uncertainties are described within the firm’s Kind 10-Ok filed with the Securities and Change Fee. Moreover, I have been requested to advise you that this convention name is being recorded in the present day, January 25, 2024, on the request of GSI Know-how. Internet hosting the decision in the present day is Lee-Lean Shu, the corporate’s Chairman, President and Chief Government Officer. With him are Douglas Schirle, Chief Monetary Officer; and Didier Lasserre, Vice President of Gross sales. I’d now like to show the convention over to Mr. Shu. Please go forward, sir.

Lee-Lean Shu: Good afternoon, and thanks for becoming a member of us. I’m happy to share a number of key updates from an eventful third quarter. Beginning with the product growth, we achieved two main milestones that may hold us on monitor to advance the Gemini APU household. First, in November, we efficiently accomplished the radiation-hardened testing on the Gemini-I APU for compute-in-space functions. The take a look at outcomes affirm that Gemini-I has met traits to be a radiation-tolerant processor. We’re actively engaged with a number of satellite tv for pc firms that want radiation-tolerant APUs, and we’re inspired by the sturdy curiosity. Transferring to our next-generation APU, we accomplished the desk of Gemini-II within the third quarter. In late February, we are going to consider the preliminary spin and count on to start sampling Gemini-II chip within the second half of calendar 2024. Gemini-II has 8 occasions of inside reminiscence and 10 occasions higher efficiency than Gemini-I and notably decrease price. This dramatically enhance in price efficiency permit us to focus on a wider vary of functions. The 96-megabyte of inside reminiscence in Gemini-II can match many AI fashions totally on the chip, enabling in-place knowledge processing with out accessing exterior reminiscence, exterior [DRAM] (ph). This could give Gemini-II super benefit on compact edge functions like drone and ADAS. We anticipate beginning preliminary alpha deployment with choose clients within the second half of calendar 2024. Lastly, within the third quarter, we shipped radiation-hardened SRAMs to 2 clients for 2 new applications and we acquired a second SBIR Direct-to-Part II contract within the quantity of $1.1 million. Trying forward, we’re within the early stage of creating the structure for our next-generation Gemini-III chip. We had a dialogue with a number of hyperscalers about APU design choices to finest tackle the rising markets’ want within the knowledge heart. Along with serving to hyperscalers decrease knowledge heart energy consumption, the APU may present vital profit to GenAI finish customers by lowering inference prices. We initiated preliminary dialogue with two main hyperscalers who’ve expressed curiosity in our know-how and proceed to work with inside groups on varied early-stage ideas. Turning to our monetary efficiency, the third quarter income of $5.3 million met our steering, with a gross margin of 56% was on the midpoint of our steering. The sequential enchancment in gross margin displays product combine this quarter. Our working bills, which elevated each year-over-year and sequentially, included a one-time expense of $2.4 million for pre-production masks for Gemini-II. We view this as an funding in future progress as Gemini-II will tremendously broaden APU market attain. In parallel, we proceed dialogue with potential strategic companions to help Gemini-II launch and help with Gemini-III growth. As our most formidable chip in the present day, we anticipate that Gemini-III would require vital capital funding and partnership to assist mitigate our funding wants. We stay targeted on meals and monetary administration to gas our product roadmap and growth into new markets. Just lately, Cornell College printed a analysis paper, spotlighting the distinctive effectivity of our Gemini-I APU to accelerating location filtering in DNA mapping. Didier will focus on the element of the paper and its implications for GSI in his feedback. In closing, it was an eventful third quarter with super progress on our Gemini roadmap, prudent expense administration and motion to extend our monetary flexibility to help our progress. We stay laser-focus on bringing our revolutionary APUs to market and driving long-term worth creation. Now, I’ll hand the decision over to Didier, who will focus on our enterprise efficiency additional. Please go forward, Didier.

Didier Lasserre: Thanks, Lee-Lean. I need to present some extra context on why we’re so assured available in the market potential for our APU structure, particularly for inference workloads. First, the unequalled flexibility of our variable bit processing is vital. With 2 million undefined bit processors that may be toggled from 1 bit to 2 million bits cycle by cycle, our APU can adapt to actual time — I am sorry, in actual time to maximise effectivity. This dynamic bit-wise configurability can course of lengthy strips 1 bit at a time and is right for inference since analysis exhibits that totally different bit precisions are extra environment friendly for various fashions. Second, our APU structure breaks the Von Neumann mannequin by eradicating the info fetch operate. This revolutionary design delivers increased efficiency with decrease energy consumption. As Lee-Lean talked about, these capabilities immediately tackle the vital wants of information facilities and rising functions by decreasing knowledge heart energy consumption and lowering inference prices for GenAI finish customers. Importantly, I need to emphasize that our APU represents true in-memory — I am sorry, true compute-in-memory structure. In contrast to competing chips that declare compute-in-memory, they’re truly close to reminiscence compute, and our APU has logic bodily built-in within the reminiscence. This basic distinction in structure will in the end allow our APU to realize the transformative velocity and effectivity positive aspects we anticipate as we scale. Our true compute-in-memory structure provides us a sustained aggressive benefit. To speed up ecosystem growth, we’re specializing in getting APU within the arms of key companions within the army, hyperscalers and academia. The true-world deployment and libraries will showcase the advantages, broaden use circumstances, and help our go-to-market capabilities. One instance of the technique helps us promote and monetize Gemini-I is a lately printed analysis paper from Cornell College. We’re happy to announce that the Cornell paper demonstrates our APU one — I am sorry, Gemini-I APU’s distinctive efficiency advantages for genomic functions. Leveraging the APU’s massively parallel in-memory structure, Cornell researchers confirmed as much as 6 occasions sooner DNA sequencing filtering in comparison with a 16-core CPU. This showcases our know-how’s benefit for data-intensive workloads requiring fast, low-precision comparisons. The examine additionally revealed sturdy potential to speed up different functions with related data-matching wants, together with medical knowledge evaluation, search, safety, and extra. With easy scaling, our APU may be packed into cost-effective high-density servers to multiply this efficiency for real-world deployments that may decrease energy budgets for hyperscalers in comparison with GPU options. These outcomes implement — I am sorry reinforce our vital market alternatives throughout sectors that depend on effectively discovering patterns and similarities inside huge knowledge units. We stay targeted on delivering the game-changing in-memory compute efficiency to clients throughout a number of industries. As Lee-Lean talked about, we anticipate receiving first silicon gadgets of Gemini-II in February. After preliminary analysis and debugging, we are going to goal a second spin this summer season and provoke benchmarking shortly after. Our $2.3 million in SBIR funding will help this growth. As a reminder, this contains our lately introduced second SBIR Direct-to-Part II $1.1 million contract to create specialised algorithms for the U.S. Air Power Analysis Laboratory. The goal functions embrace in-craft functions corresponding to search and rescue, object detection, shifting goal indication, change detection, and SSIM in GPS-absent conditions. GSI may even develop algorithms utilizing knowledge from the U.S. House Power to showcase the efficiency advantages of its compute-in-memory APU2 built-in circuit. In abstract, the flexibility of structure, hands-on buyer engagements, and ecosystem partnerships provides us confidence in our market alternative. We’ve a sturdy product roadmap to ship steady improvements that we are able to — that we imagine will capitalize APU adoption throughout a number of industries within the coming years. Let me change now to buyer and product breakdown for the third quarter. Within the third quarter of fiscal 2024, gross sales to Nokia have been $807,000 or 15.2% of internet revenues in comparison with $1.3 million or 20% of internet revenues in the identical interval a 12 months in the past, and $1.2 million or 20.3% of revenues within the prior quarter. Navy/protection gross sales have been 28.2% of third quarter shipments in comparison with 26.2% of shipments within the comparable interval a 12 months in the past, and 34.8% of shipments within the prior quarter. SigmaQuad gross sales have been 46.9% of third quarter shipments in comparison with 45.2% within the third quarter of fiscal 2023, and 55.8% within the prior quarter. On one final word on product gross sales within the third quarter, we shipped over $600,000 of a prototype radiation-hardened SRAM to 2 totally different clients. These might be deployed in two separate satellite tv for pc applications. I might like at hand the decision over to Doug. Doug, go forward, please.

Douglas Schirle: Thanks, Didier. We reported a internet lack of $6.6 million, or $0.26 per diluted share, on internet revenues of $5.3 million for the third quarter of fiscal 2024, in comparison with internet losses of $4.8 million, or $0.20 per diluted share, on internet revenues of $6.4 million for the third quarter of fiscal 2023 and a internet lack of $4.1 million, or $0.16 per diluted share, on internet revenues of $5.7 million within the second quarter of fiscal 2024. Gross margin was 55.9% in comparison with 57.5% within the prior-year interval and 54.7% within the previous second quarter. The adjustments in gross margin have been primarily because of adjustments in product combine and quantity offered within the three intervals. Complete working bills within the third quarter of fiscal 2024 have been $9.7 million in comparison with $8.5 million within the third quarter of fiscal 2023 and $7.2 million within the prior quarter. Analysis and growth bills have been $7 million in comparison with $5.5 million within the prior-year interval and $4.7 million within the prior quarter. Promoting, normal and administrative bills have been $2.7 million within the quarter ended December 31, 2023 in comparison with $3 million within the prior-year quarter and $2.5 million within the earlier quarter. Third quarter fiscal 2024 working loss was $6.7 million in comparison with $4.8 million within the prior-year interval and an working lack of $4.1 million within the prior quarter. Third quarter fiscal 2024 internet loss included internet curiosity and different revenue of $155,000 and a tax provision of $71,000, in comparison with internet curiosity and different revenue of $61,000 and a tax provision of $84,000 for a similar interval a 12 months in the past. Within the previous second quarter, internet loss included internet curiosity and different revenue of $71,000 and a tax provision of $33,000. Complete third quarter pre-tax stock-based compensation expense was $649,000 in comparison with $655,000 within the comparable quarter a 12 months in the past and $676,000 within the prior quarter. At December 31, 2023, we had $21.6 million in money and money equivalents, in comparison with $30.6 million in money, money equivalents and short-term investments at March 31, 2023. Working capital was $23.1 million as of December 31, 2023 versus $34.7 million at March 31, 2023, with no debt. Stockholders’ fairness as of December 31 was $39.6 million in comparison with $51.4 million as of the fiscal 12 months ended March 31, 2023. For the fourth quarter of fiscal 2024, we anticipate internet revenues in a spread of $4.8 million to $5.4 million, with gross margin of roughly 55% to 57%. Operator, at this level, we might prefer to open the decision to Q&A.

Operator: Thanks. We are going to now be conducting a question-and-answer session. [Operator Instructions] Our first query is from Brett Reiss with Janney Montgomery Scott. Please proceed along with your query.

Brett Reiss: Hello, gents. You may speak to me like I am six-years-old. May you simply clarify what’s an rare $2.4 million cost for a pre-production masks? I am not an engineer. Simply in case you can provide me some extra readability on that?

Douglas Schirle: Yeah. So, each time we’ve a product, we’ve to have a masks set ready to run within the fab to fabricate the wafers. Now, usually, once we incur costs for masks set for manufacturing product, we are going to capitalize that into prepaids and amortize it over a 12-month interval. Nevertheless, the one exception to that’s when we’ve masks set ready on a brand new course of know-how that we have by no means run earlier than, we’ll cost that expense to R&D expense. So, on this quarter — nicely final quarter, we taped out Gemini-II on a course of know-how we have by no means used. It is a 16-nanometer course of at TSMC. Now, since we have by no means used that course of earlier than, we cost that $2.4 million to R&D expense.

Brett Reiss: All proper. So, that is one shot. It isn’t going to be reoccurring?

Douglas Schirle: No. It would recur sooner or later when we’ve one other product that tapes out on a course of know-how that we have by no means used earlier than. So, it is rare. It does not occur yearly. It is at most each two or three years.

Brett Reiss: Okay. The money, which was my margin of security in my funding right here, retains dwindling down. I am somewhat involved about that. A few of these initiatives with bringing in different three way partnership companions, what is the timetable on that? And the way lengthy do we’ve earlier than we burn by means of the remaining money?

Douglas Schirle: Effectively, we’re presently varied alternatives, and Didier talked about speaking to hyperscalers and others. To come back out with our subsequent product, it is going to require vital investments, so we’re searching for companions or different sources of funding. Along with that, we’ve a constructing that is — we personal that is value fairly a bit of cash, and we’ll be wanting into doubtlessly promoting that constructing within the close to future.

Brett Reiss: Proper. What’s the constructing appraised at? And in a base case situation, what do you suppose you possibly can promote it for?

Douglas Schirle: We expect we are able to most likely get someplace within the vary of $10 million to $13 million.

Brett Reiss: Proper.

Douglas Schirle: And there is not any debt tied to that. It is absolutely paid for.

Brett Reiss: Proper. May you simply give me a broad define of what the construction of a three way partnership companion’s capital funding in GSIT would take? Would they pay an upfront milestone cost with different funds to observe? Would it not be an fairness funding? What do you suppose the construction of that will seem like?

Didier Lasserre: So, it might be both of these. What I imply is when Lee-Lean was speaking a couple of companion for funding the following program, that is particularly for Gemini-III. So, Gemini-II was absolutely funded internally. However for Gemini-III, we’re searching for a companion for that, almost definitely a buyer funding companion. However apart from that, that will be extra of an NRE sort of funding, so there can be milestones related to that. However apart from that, we’re additionally open to fairness investments within the firm as nicely.

Brett Reiss: Okay. I will drop again in queue. Thanks for taking my questions.

Douglas Schirle: Thanks.

Didier Lasserre: Thanks, Brett.

Operator: [Operator Instructions] Our subsequent query is from Jeff Bernstein with Silverberg Bernstein Capital. Please proceed along with your query.

Jeff Bernstein: Yeah, hello. Good afternoon. So, only a query on the — and congratulations on inserting these rad-hard SRAM elements for analysis. In case you have been to win these applications, about how a lot income and over what time interval would possibly you be capable of acquire from these two satellite tv for pc applications?

Didier Lasserre: Certain. So one of many applications was — and once more, that is only a prototype amount for demonstration functions. Considered one of them was simply over $500,000 and the opposite one was about $150,000, and it totaled 41 elements that we shipped. You are able to do fast calculation with the ASPs are on these. And so, these are simply the, once more, prototype portions. So, clearly, you’ll be able to multiply by one thing. We do not have the portions but. These are applications that they are trying to launch throughout the subsequent 12 months. And so, it could be someday second half of 2025 on the soonest earlier than they launch manufacturing. However actually it could be north — if the prototype is $500,000, you’ll be able to think about what a manufacturing is perhaps.

Jeff Bernstein: And so, these can be like GEO satellites. So, these aren’t satellite tv for pc networks. These are going to be particular person bigger satellites?

Didier Lasserre: These ones are X, one is GEO, one is definitely LEO.

Jeff Bernstein: Okay. And can you get an automated with these analysis elements? Are you going to get a journey into house on one in every of these and truly get type of provenance from that, or are we nonetheless trying to get that some other place?

Didier Lasserre: No. So, actually, we’ve — as we have spoken up to now, we’ve different prototype gadgets we have shipped out already within the final couple of years. And so, it might be any of the applications we have mentioned up to now or these two. Considered one of these seems to be like is pretty accelerated of their timetable. So, there’s an opportunity one of many ones we simply shipped this final quarter may stand up pretty shortly.

Jeff Bernstein: Okay. After which, simply on Nokia lowest income from them in eternally, what is the story on Nokia and the outlook for that router that you simply promote into?

Didier Lasserre: So, they’re contract producers, as a result of we ship these elements to 2 separate contract producers. And so they each had somewhat little bit of stock, in order that they have been burning by means of some stock. So far as the — we get, I feel we have talked up to now, a 12-month rolling forecast from Nokia, and people nonetheless are coming in across the run price we have been seeing for the final couple quarters. So, just a bit bit north of what we did this previous quarter, someplace in $1 million, $1.1 million type of vary 1 / 4.

Jeff Bernstein: Okay. And at Needham, I feel you additionally talked about along with searching for a companion, doubtlessly a monetary companion, doubtlessly a growth companion, probably a hybrid of each of these for Gemini-III. I feel you additionally talked about one thing about doubtlessly licensing IP. It seems like for what would most likely be an edge type of case for semiconductor IP for doing in-memory processing. Are you able to simply speak about that? Would that be type of an upfront license after which royalty stream, or simply give some shade round that?

Lee-Lean Shu: Yeah. The IP — nicely, we’re extra targeted on the Gemini-III. So, it might be IP or it might be the product growth for the shopper. So, principally, I feel we’ve — as we talked about within the convention name, I imply we made fairly good progress over the quarter. So — yeah, so we’re nonetheless engaged on it.

Operator: Thanks. There aren’t any additional questions presently. I might like at hand the decision again to Lee-Lean Shu for any closing feedback.

Lee-Lean Shu: Thanks all for becoming a member of us. We stay up for talking with you once more once we report our fourth quarter and the complete 12 months fiscal 2024 outcomes.

Operator: This concludes in the present day’s convention. Chances are you’ll disconnect your strains presently. Thanks on your participation.

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