GSI Technology, Inc. (GSIT) on Q4 2021 Results - Earnings Call Transcript
Operator: Ladies and gentlemen thank you for standing by. Welcome to GSI Technology's Fourth Quarter and Fiscal Year 2021 Results Conference Call. 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 Forms 10-Q and 10-K filed with the Securities and Exchange Commission. Many of these risks are currently amplified by and will continue to be amplified by or in the future may be amplified by the COVID-19 global pandemic. Additionally, I have been asked to advise you that this conference call is being recorded today May 6, 2021 at the request of GSI Technology.
Lee-Lean Shu: Good afternoon and thank you for joining us today to review our fourth quarter and fiscal year 2021 results. I will cover some highlights from the year and give an update on our APU products followed by Didier Lasserre with comments on products and the sales breakdown. Afterward Doug Schirle will review in detail our fourth quarter and full year fiscal 2021 financial results. Fiscal year 2021 brought several unforeseen challenges to our business. We faced a global pandemic and slowing sales from our largest customer. With that said, we stay focused on our key objective of bringing Gemini-I to market and increasing awareness of our groundbreaking technology. We made good progress on both of these fronts. Despite the challenge presented by COVID over the past year, we launched remote cloud-based data centers in Israel and the US for customers to test and demo Gemini-I. The Gemini APU is receiving more media coverage, highlighting its unique advantage and benefits. We have also received third-party validation of Gemini for certain applications including our Elasticsearch profit which Didier will discuss this section. Including the system bottleneck problem facing big data, instigating heightened attention several leading semiconductor company have recently introduced others. They have positioned a solution to eliminate system bottleneck. The system bottleneck will refer to it the Von Neumann bottleneck caused by the separate memory and the CPU in the Von Neumann architecture. The Von Neumann architecture requires a CPU to fetch data for every operation it performed. We don't believe that any of the new solutions address the actual problem. The only way to truly eliminate the bottleneck is to break the Von Neumann model. This is how the Gemini APU does. We remove the limitation of the Von Neumann architecture. With the Gemini APU, we break the von Neumann model and/or showing a new architecture that puts process in the memory. Today we are working on numerous applications with our customers and is demonstrating how our revolutionary architecture can reduce latency reduce power consumption and offer scalable traceable solutions. When we look at the trends that favor Gemini and APU architecture ESG and the growing awareness of sustainability will be a significant trend that favors us. ESG and the power consumption are increasingly topic on the radar, in the press, in the ballroom and with the investors. Enable growing data centers where AI and big data are rapidly increasing power consumption that is a heightened focus on finding a better solution to use less power.
Didier Lasserre: Thank you, Lee-Lean. I would like to touch on two things in my comments: the third party validation of the GSI plug-in for Elasticsearch, and the recently announced Phase 1 contract with NASA. First, a little background on Elasticsearch for those unfamiliar with the name. Elasticsearch is the most popular search engine. What makes Elasticsearch so popular is that: one, it's open sourced and free software; and number two, the way it stores documents with searchable references that allow them to be searched and retrieved and enables visualization tools for visual search. Very flexible and highly functional Elasticsearch has become the go-to search solution for scalable real-time search. Recently a third party tested our Elasticsearch plug-in powered by the Gemini APU, which demonstrated the fastest vector query speed on a one million item search compared to four other methods. At 92.6 milliseconds the Gemini APU was 82% faster than the next fastest solution and showed a 94% improvement from the slowest response solution. They also noted that unlike other methods Gemini supported batch queries. These are impressive performance results, and it's great to see them published by an independent party. Switching to the NASA contract. We issued a press release earlier this month announcing that we were awarded along with prime contractor Space Micro, a Phase 1 contract to develop a real-time sorting Inference Processing Unit, also known as an IPU, an IPU board for earth observation missions.
Doug Schirle: Thank you Didier. For the fiscal year ended March 31 2021, we reported a net loss of $21.5 million or $0.91 per diluted share, a net revenues of $27.7 million, a net loss of $10.3 million or $0.45 per diluted share, a net revenues of $43.3 million in the fiscal year ended March 31 2020. Gross margin for fiscal 2021 was 47.7% compared to 58.5% in the prior year. Total operating expenses were $34.5 million in fiscal 2021, a decrease of 4.6% from $36.1 million in fiscal 2020. Research and development expenses were $23.3 million compared to $25.2 million in the prior fiscal year. And selling general and administrative expenses were $11.1 million compared to $10.9 million in fiscal 2020. The decrease in research and development expense was primarily due to a charge of $2.7 million during the third quarter of fiscal 2020 for purchased intellectual property that is being incorporated into our next-generation of Gemini chips.
Operator: Thank you. Our first question will come from Kurt Caramanidis with Carl M. Hennig.
Kurt Caramanidis: Thank you. Question is the NASA win -- are we counting that as a Gemina win then? I thought it was mainly for Rad-Tolerant, but now you're saying that's the Gemini board. Is that kind of a double solution for that?
Didier Lasserre: Correct. So it is the Gemini solution, but it will be a Rad-Tolerant version of our Gemini chip. I think if you recall I spent some time, we did some radiation testing on the Gemini. It's been about 1.5 years and the results came back very, very promising. And so, we certainly took -- we took the testing beyond Rad-Tolerant, but short of Rad-Hard. So we feel very comfortable that the solution will work at Rad-Tolerant levels.
Kurt Caramanidis: Okay. What is your level of confidence in a design win for Gemini, whether it's facial recognition? At one point you were talking about signaling and then some other things. Now, let's say for calendar 2021, is there anything close warm hot?
Didier Lasserre: Yes. So as Lee-Lean spoke about in his script, we certainly have a lot of customers we're talking to in different market segments. It's premature to say when some of those might hit. Is there a chance they could hit in calendar 2021? Possibly. Could it get pushed out? Hard to say. Right now, we're still in that design in phase. So it's hard to predict when some revenues may occur.
Kurt Caramanidis: Okay. And then maybe a bigger question or -- if you're not able to get design wins, is there a path or a time where you would maybe look to license partner, or how do we view -- we just keep going until you get something or is there some point where you say maybe we bring someone else in to help sell it, or what is the thought there?
Lee-Lean Shu: Well, as I mentioned earlier, we do have a very productive meeting with the customer and I feel comfortable right now. And we will get some -- hopefully, we will get some more concrete use along the ones that we have a more obvious result. Okay. And in terms of licensing, we do talk to customers. If it's worthwhile for us to go thereof we definitely will consider it. But from the marketing still in the IPU, we are not in demo. Okay. But if there's a specific area with a big customer as I mentioned worthwhile then we will definitely work on it.
Kurt Caramanidis: Okay. Doug, I apologize, I might have missed that. Did you extend or expand the buyback, or then I heard you say cash conservation, can you restate that? I apologize.
Doug Schirle: Yes. We still have $4.3 million available to repurchase shares and we'll be opportunistic with it.
Kurt Caramanidis: Okay. So that's kind of unchanged?
Doug Schirle: Yes.
Kurt Caramanidis: Yes. Okay. Thanks a lot. Wait I have one more question. Am I still on?
Doug Schirle: Sure.
Kurt Caramanidis: The Rad-Hard, have you reached heritage yet? Have you had any launches, or is that still in wait?
Didier Lasserre: So as we've talked about Rad-Hard is kind of a difficult area for us now because of the shutdowns. As we've recalled most if not all the Rad-Hard opportunities are some kind of a national asset that require face-to-face meetings which we're unable to do right now. The Rad-Tolerant however, as I mentioned we just got the PO two days ago for a demonstration satellite that's going to ultimately be part of a constellation. That will be Rad-Tolerant, but we're hoping that that happens by the very end of this year or beginning of next year and that will give us an elusive heritage that you're talking about.
Kurt Caramanidis: Okay. Great. Okay. Thanks a lot.
Didier Lasserre: Thanks Kurt.
Operator: At this time, there are no further questions. I'll now turn the conference back over to you.
Lee-Lean Shu: Thank you all for joining us. We look forward to speaking with you again when we report our first quarter fiscal 2022 results. Thank you.
Operator: Thank you. That does conclude today's conference. We do thank you for your participation. Have an excellent day.
