GSI Technology, Inc. Reports First Quarter Fiscal 2025 Results

Rhea-AI Summary

GSI Technology (Nasdaq: GSIT) reported Q1 fiscal 2025 results with net revenues of $4.7 million, down from $5.6 million in Q1 fiscal 2024. The company posted a net income of $1.1 million, or $0.04 per diluted share, compared to a net loss of $(5.1) million in the same period last year. This includes a one-time gain of $5.7 million from a sale and leaseback transaction. Gross margin decreased to 46.3% from 54.9% year-over-year. Cash on hand increased to $21.8 million. The company is focusing on new business lines with Gemini-I and Gemini-II, including a GXL platform for Fast Vector Search and expanding DOD SBIR proposals. For Q2 fiscal 2025, GSI Technology expects net revenues between $4.2 million to $4.8 million with a gross margin of 44% to 46%.

Positive

• Net income of $1.1 million, or $0.04 per diluted share, compared to a net loss in the previous year
• One-time gain of $5.7 million from sale and leaseback transaction
• Cash on hand increased to $21.8 million from $14.4 million in the previous quarter
• Expanding DOD SBIR proposal pipeline, targeting contracts totaling $6 million
• On track to begin customer sampling of Gemini-II software in early calendar 2025

Negative

• Net revenues decreased to $4.7 million from $5.6 million in Q1 fiscal 2024
• Gross margin declined to 46.3% from 54.9% year-over-year
• Sales to Nokia decreased to $998,000 from $1.9 million in the same period last year
• SigmaQuad sales decreased to 36.3% of shipments from 58.6% in Q1 fiscal 2024
• Expected Q2 fiscal 2025 revenues of $4.2-$4.8 million indicate potential continued decline

Insights

Financial Analyst

GSI Technology's Q1 FY2025 results paint a mixed picture. While the company reported net income of $1.078 million ($0.04 per diluted share), this was largely due to a one-time gain of $5.7 million from a sale and leaseback transaction. Excluding this, the company's core operations remain challenged.

Revenue declined to $4.671 million, down 16.4% year-over-year and 9.3% sequentially. This decline was attributed to lower sales of SigmaQuad SRAM and reduced SRAM sales to military contractors. Gross margin also contracted to 46.3% from 54.9% a year ago, primarily due to product mix and the impact of lower revenue on fixed costs.

On a positive note, operating expenses decreased to $6.818 million from $8.208 million in the prior year, reflecting some cost control measures. The company's cash position improved to $21.8 million, bolstered by the sale and leaseback transaction.

Looking ahead, management's Q2 FY2025 guidance suggests continued challenges, with projected revenue of $4.2-4.8 million and gross margin of 44-46%. The company is banking on new business lines with Gemini-I and Gemini-II to reverse the revenue decline and achieve financial stability.

Tech Expert

GSI Technology's strategic pivot towards AI and HPC processing with its Associative Processing Unit (APU) is a bold move, but it's yet to translate into tangible financial results. The company's new GXL platform for Fast Vector Search, based on Gemini-I, shows promise in addressing the growing demand for efficient database indexing and updates. This could potentially open up new market opportunities, especially in cloud-based and on-premises solutions.

The company's progress in Department of Defense (DOD) Small Business Innovation Research (SBIR) contracts is noteworthy. With a $6 million target and successful milestone completions in Phase I and II, GSI is positioning itself well in the high-value defense sector. The recent win of a third SBIR contract with a large DOD division further validates their technology's potential in this space.

The planned customer sampling of Gemini-II software in early 2025, along with the anticipated completion of firmware and software library development by December 2024, suggests that GSI is on track with its product roadmap. However, the key challenge remains in translating these technological advancements into revenue growth and profitability.

While the company's innovations are promising, the current financial performance indicates a critical need to accelerate market adoption of these new technologies to offset the declining SRAM business.

SUNNYVALE, Calif., July 25, 2024 (GLOBE NEWSWIRE) -- GSI Technology, Inc. (Nasdaq: GSIT), the inventor of the Associative Processing Unit (APU), a paradigm shift in AI and HPC processing providing true compute-in-memory technology, today reported financial results for its first fiscal quarter ended June 30, 2024.

Summary Financial Results Table (in thousands, except per share amounts)

	Three Months Ended
	June 30, 2024			Mar. 31, 2024			June 30, 2023
Net revenues	$	4,671		$	5,152		$	5,587
Gross margin (%)		46.3	%		51.6	%		54.9	%
Operating expenses	$	6,818		$	7,172		$	8,208
Operating loss	$	(4,657	)	$	(4,514	)	$	(5,139	)
Net income (loss)	$	1,078		$	(4,321	)	$	(5,110	)
Net income (loss) per share, diluted	$	0.04		$	(0.17	)	$	(0.21	)

Lee-Lean Shu, Chairman and Chief Executive Officer commented, “First quarter revenue of $4.7 million was within our guidance range despite lower sales of SigmaQuad SRAM and lower sales of our SRAM products to military prime contractors. To reverse this revenue decline, achieve financial stability and ultimately return to growth, we are focused on introducing new business lines with Gemini-I and Gemini-II. Cash on hand at June 30, 2024, which includes the net proceeds from the sale and leaseback transaction completed in June, was $21.8 million compared to $14.4 million at March 31, 2024.”

Mr. Shu continued, "Our new GXL platform for Fast Vector Search, based on Gemini-I, will be available as a cloud-based or on-prem solution. We have identified potential partners for this innovative low-power solution, which speeds up the indexing process in fast vector search, allowing quicker database updates. We are also expanding our Department of Defense (“DOD”) SBIR proposal pipeline, targeting contracts totaling $6 million. We are successfully meeting our milestones on Phase I and Phase II SBIRs, which are on track for completion in calendar 2025, and recently received confirmation of winning a third SBIR contract with a large division of the DOD. Additionally, we are on track to begin customer sampling of Gemini-II software in early calendar 2025. We aim to finalize Germini-II’s firmware and software library development by December 2024."

Commenting on GSI’s second quarter of fiscal 2025 outlook, Mr. Shu stated, “Current expectations for the upcoming fiscal second quarter are net revenues in a range of $4.2 million to $4.8 million, with gross margin of approximately 44% to 46%.”

First Quarter Fiscal Year 2025 Summary Financials

The Company reported net revenues of $4.7 million for the first quarter of fiscal 2025, compared to $5.6 million for the first quarter of fiscal 2024 and $5.2 million for the fourth quarter of fiscal 2024. The decline in revenue was due to lower sales of SigmaQuad SRAM and lower sales of our SRAM products to military prime contractors.

Gross margin was 46.3% in the first quarter of fiscal 2025 compared to 54.9% in the first quarter of fiscal 2024 and 51.6% in the preceding fourth quarter of fiscal 2024. The decrease in gross margin in the first quarter of 2025 was primarily due to product mix and the effect of lower revenue on the fixed costs in our cost of revenues. 

In the first quarter of fiscal 2025, sales to Nokia were $998,000, or 21.4% of net revenues, compared to $1.9 million, or 33.5% of net revenues, in the same period a year ago and $694,000, or 13.5% of net revenues, in the prior quarter. Military/defense sales were 31.9% of first quarter shipments compared to 33.8% of shipments in the comparable period a year ago and 35.5% of shipments in the prior quarter. SigmaQuad sales were 36.3% of first quarter shipments compared to 58.6% in the first quarter of fiscal 2024 and 42.4% in the prior quarter. 

Total operating expenses in the first quarter of fiscal 2025 were $6.8 million, compared to $8.2 million in the first quarter of fiscal 2024 and $7.2 million in the prior quarter. Research and development expenses were $4.2 million, compared to $5.2 million in the prior-year period and $4.8 million in the prior quarter. Selling, general and administrative expenses were $2.6 million in the quarter ended June 30, 2024, compared to $3.0 million in the prior-year quarter and $2.4 million in the previous quarter. 

First quarter fiscal 2025 operating loss was $(4.7) million compared to an operating loss of $(5.1) million in the prior-year period and an operating loss of $(4.5) million in the prior quarter. First quarter fiscal 2025 net income included interest and other income of $55,000 and a tax provision of $57,000, compared to $80,000 in interest and other income and a tax provision of $51,000 for the same period a year ago. In the preceding fourth quarter, net loss included interest and other income of $108,000 and a tax benefit of $(85,000). 

Net income in the first quarter of fiscal 2025 was $1.1 million, or $0.04 per diluted share, reflecting a one-time gain of $5.7 million on the sale and leaseback transaction related to the sale of the Company’s headquarters, compared to a net loss of $(5.1) million, or $(0.21) per diluted share, for the first quarter of fiscal 2024 and a net loss of $(4.3) million, or $(0.17) per diluted share, for the fourth quarter of fiscal 2024.

Total first quarter pre-tax stock-based compensation expense was $658,000 compared to $820,000 in the comparable quarter a year ago and $693,000 in the prior quarter. 

At June 30, 2024, the Company had $21.8 million in cash and cash equivalents, compared to $14.4 million at March 31, 2024. Working capital was $25.7 million as of June 30, 2024 versus $19.1 million at March 31, 2024. Stockholders’ equity as of June 30, 2024 was $38.0 million, compared to $36.0 million as of the fiscal year ended March 31, 2024. 

Conference Call

GSI Technology will review its financial results for the quarter ended June 30, 2024, and discuss its current business outlook during a conference call at 1:30 p.m. Pacific (4:30 p.m. Eastern) today, July 25, 2024. To participate in the call, please dial 1-877-407-3982 in the U.S. or 1-201-493-6780 for international approximately 10 minutes prior to the above start time and provide Conference ID 13747827. A webcast of the call will be available and archived on the Company’s website at https://ir.gsitechnology.com/.

About GSI Technology

GSI Technology is at the forefront of the AI revolution with our groundbreaking APU technology, designed for unparalleled efficiency in billion-item database searches and high-performance computing. GSI’s innovations, Gemini-I® and Gemini-II®, offer scalable, low-power, high-capacity computing solutions that redefine edge computing capabilities. GSI Technology is not just advancing technology; we're shaping a smarter, faster, and more efficient future.

Founded in 1995 and headquartered in Sunnyvale, California, GSI Technology has 146 employees and over 125 granted patents.

For more information, please visit www.gsitechnology.com.

Forward-Looking Statements

The statements contained in this press release that are not purely historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding GSI Technology’s expectations, beliefs, intentions, or strategies regarding the future. All forward-looking statements included in this press release are based upon information available to GSI Technology as of the date hereof, and GSI Technology assumes no obligation to update any such forward-looking statements. Forward-looking statements involve a variety of risks and uncertainties, which could cause actual results to differ materially from those projected. These risks include those associated with the normal quarterly and fiscal year-end closing process, as well as the Company’s ongoing strategic review. Examples of risks that could affect our current expectations regarding future revenues and gross margins include those associated with fluctuations in GSI Technology’s operating results; GSI Technology’s historical dependence on sales to a limited number of customers and fluctuations in the mix of customers and products in any period; global public health crises that reduce economic activity; the rapidly evolving markets for GSI Technology’s products and uncertainty regarding the development of these markets; the need to develop and introduce new products to offset the historical decline in the average unit selling price of GSI Technology’s products; intensive competition; delays or unanticipated costs that may be encountered in the development of new products based on our in-place associative computing technology and the establishment of new markets and customer and partner relationships for the sale of such products; and delays or unexpected challenges related to the establishment of customer relationships and orders for GSI Technology’s radiation-hardened and tolerant semiconductor products. The strategic review is subject to risks related to the process by which GSI Technology evaluates its strategic alternatives, the terms, timing, structure, benefits and costs of any strategic transaction and whether one will be consummated at all and the impact of any strategic transaction on GSI Technology. Many of these risks are currently amplified by and will continue to be amplified by, or in the future may be amplified by, economic and geopolitical conditions, such as rising interest rates, worldwide inflationary pressures, military conflicts, and declines in the global economic environment. Further information regarding these and other risks relating to GSI Technology’s business is contained in the Company’s filings with the Securities and Exchange Commission, including those factors discussed under the caption “Risk Factors” in such filings.

Source: GSI Technology, Inc.

Investor Relations
Hayden IR
Kim Rogers
Managing Director
385-831-7337
Kim@HaydenIR.com

Media Relations
Finn Partners for GSI Technology
Ricca Silverio
(415) 348-2724
gsi@finnpartners.com

Company
GSI Technology, Inc.
Douglas M. Schirle
Chief Financial Officer
408-331-9802

GSI TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
				Three Months Ended
				June 30,			March 31,			June 30,
					2024			2024			2023
Net revenues				$4,671			$5,152			$5,587
Cost of goods sold					2,510			2,494			2,518
Gross profit					2,161			2,658			3,069
Operating expenses:
	Research & development				4,214			4,818			5,204
	Selling, general and administrative				2,604			2,354			3,004
			Total operating expenses		6,818			7,172			8,208
Operating loss					(4,657	)		(4,514	)		(5,139	)
Gain on sale and leaseback transaction					5,737			-			-
Interest and other income, net					55			108			80
Income (loss) before income taxes					1,135			(4,406	)		(5,059	)
Provision (benefit) for income taxes					57			(85	)		51
Net income (loss)				$1,078				($4,321	)		($5,110	)
Net income (loss) per share, basic				$0.04				($0.17	)		($0.21	)
Net income (loss) per share, diluted				$0.04				($0.17	)		($0.21	)
Weighted-average shares used in
computing per share amounts:
Basic					25,374			25,297			24,866
Diluted					25,686			25,297			24,866
Stock-based compensation included in the Condensed Consolidated Statements of Operations:
				June 30,			March 31,			June 30,
					2024			2024			2023
Cost of goods sold				$56			$53			$67
Research & development					290			331			386
Selling, general and administrative					312			309			367
				$658			$693			$820

GSI TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
					June 30, 2024			March 31, 2024
Cash and cash equivalents					$21,765			$14,429
Accounts receivable						2,718			3,118
Inventory						4,467			4,977
Other current assets						2,143			1,954
Assets held for sale						0			5,629
Net property and equipment						1,076			1,148
Operating lease right-of-use assets						10,471			1,553
Other assets						9,687			9,656
Total assets					$52,327			$42,464
Current liabilities					$5,422			$5,365
Long-term liabilities						8,903			1,129
Stockholders' equity						38,002			35,970
Total liabilities and stockholders' equity					$52,327			$42,464

FAQ

What were GSI Technology's (GSIT) Q1 fiscal 2025 earnings results?

GSI Technology reported net income of $1.1 million, or $0.04 per diluted share, for Q1 fiscal 2025. This includes a one-time gain of $5.7 million from a sale and leaseback transaction.

How did GSIT's revenue in Q1 fiscal 2025 compare to the previous year?

GSI Technology's net revenues for Q1 fiscal 2025 were $4.7 million, down from $5.6 million in Q1 fiscal 2024, representing a decrease in revenue year-over-year.

What is GSI Technology's (GSIT) cash position as of June 30, 2024?

GSI Technology reported cash and cash equivalents of $21.8 million as of June 30, 2024, an increase from $14.4 million at March 31, 2024.

What is GSIT's revenue guidance for Q2 fiscal 2025?

GSI Technology expects net revenues in the range of $4.2 million to $4.8 million for Q2 fiscal 2025, with a gross margin of approximately 44% to 46%.

What new business initiatives is GSI Technology (GSIT) focusing on?

GSI Technology is focusing on introducing new business lines with Gemini-I and Gemini-II, including a GXL platform for Fast Vector Search and expanding Department of Defense SBIR proposals.