GSI Technology (NASDAQ:GSIT) released its earnings for the third quarter of fiscal year 2025, showcasing a 2% year-over-year increase in revenue to $5.4 million and a net loss improvement to $0.16 per diluted share. The company's stock experienced a 4.11% decline in after-hours trading, closing at $2.8. According to InvestingPro data, GSIT's financial health score stands at 1.26, indicating weak overall conditions despite operational improvements and strategic initiatives.
Key Takeaways
- GSI Technology reported a 2% YoY revenue increase and a 19% sequential growth.
- The company improved its net loss from $0.26 to $0.16 per share.
- Stock price fell by 4.11% in after-hours trading.
- The company is advancing its AI chip solutions with the upcoming Gemini 2 APU and PLATO chip.
Company Performance
GSI Technology demonstrated resilience in the third quarter of fiscal 2025 by posting a modest revenue increase and narrowing its net loss. While InvestingPro analysis shows the company is quickly burning through cash, its strong balance sheet maintains more cash than debt. The company's strategic focus on AI and edge computing markets, alongside cost reduction initiatives, has contributed to improved financial performance. Compared to the previous quarter, the company achieved a 19% sequential growth, signaling robust operational momentum.
Financial Highlights
- Revenue: $5.4 million (2% YoY increase, 19% sequential growth)
- Gross Margin: 54% (down from 55.9% YoY, up from 38.6% in the previous quarter)
- Net Loss: $4 million or $0.16 per diluted share (improved from $6.6 million or $0.26 per share in Q3 2024)
- Cash and Cash Equivalents: $15.1 million (up from $14.4 million in March 2024)
Earnings vs. Forecast
GSI Technology's earnings per share of $-0.16 met investor expectations, showing a significant improvement from the previous year's loss of $0.26 per share. The revenue of $5.4 million aligns with market projections, indicating stable performance amidst ongoing strategic transformations.
Market Reaction
Despite the operational improvements, GSI Technology's stock price fell by 4.11% in after-hours trading, closing at $2.8. This decline may reflect investor caution regarding the company's future profitability and market positioning. InvestingPro data reveals the stock has experienced high price volatility, with a -12.77% return over the past week, though maintaining a positive 33.97% return over the last year. The stock is currently trading closer to its 52-week low of $2.01, highlighting the challenges GSI Technology faces in gaining investor confidence. Unlock 7 additional ProTips and comprehensive analysis with an InvestingPro subscription, including exclusive Fair Value calculations and detailed financial metrics.
Outlook & Guidance
GSI Technology is focused on expanding its presence in the AI and edge computing markets with upcoming product launches, including the Gemini 2 APU and PLATO chip. The company anticipates securing its largest customer in fiscal year 2025 and is exploring various funding pathways to support its strategic initiatives.
Executive Commentary
"Our improved operating efficiency, growing SNS sales, and strategic initiatives in commercial and government markets position us well for sustainable growth," stated CEO Liliin Xu. VP of Sales Didier Lasserre emphasized, "PLATO's ultra-low power design will target rapidly growing markets for the edge and large language model solutions."
Risks and Challenges
- Market Competition: Intense competition in the AI chip sector could impact growth.
- Product Development: Delays in Gemini 2 and PLATO chip development could hinder market entry.
- Investor Sentiment: Continued stock price volatility might affect investor confidence.
- Strategic Alternatives: The ongoing strategic review may not yield favorable outcomes.
- Economic Conditions: Macroeconomic pressures could influence demand for GSI Technology's products.
Q&A
During the earnings call, investors inquired about the company's in-house AI algorithm development and the strategic review process. Executives confirmed upcoming white papers and benchmarks for the Gemini 2, highlighting the company's commitment to transparency and innovation.
Full transcript - GSI Technology Inc (GSIT) Q3 2025:
Conference Operator: Welcome to GSI Technology's 3rd Quarter Fiscal 2025 Results Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. At that time, we will provide instructions for those interested in entering the queue for the Q and 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 ks filed with the Securities and Exchange Commission. Additionally, I have also been asked to advise you that this conference call is being recorded today, January 30, 2025, at the request of GSI Technology. Liliin Xu, the company's Chairman, President and Chief Executive Officer, will be hosting the call today. With him are Douglas Shirley, Chief Financial Officer and Didier Lasserre, Vice President of Sales.
I would now like to turn the conference over to Mr. Xu. Please go ahead, sir.
Liliin Xu, Chairman, President and Chief Executive Officer, GSI Technology: Good afternoon and thank you for joining us to review our Q3 fiscal 2025 financial results. I am pleased to report that our Q3 demonstrates meaningful progress in our financial performance and the ongoing initiative 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 representing a 2% increase year over year and a 19% sequential growth from the previous quarter. More importantly, our cost reduction initiatives have begun to bear fruit, resulting in a reduction in operating and net net losses compared to the Q3 of fiscal 2024.
Looking at our S and M business, I am encouraged by the continued momentum in our core S and M segment. Revenue growth this quarter in S and M came from existing customers resuming over at their inventory level Romonnet and growing SMM demand from the customer for our 144 meg SMM, both system integrals to manufacturing leading AI chip. We anticipate this customer becoming our largest excellent customer in fiscal year 2025. Let me share a few key developments on the APU front. So far, our APU technology is progressing steadily.
We made good progress using the GMSI 2 super silicon,
Conference Operator: which
Liliin Xu, Chairman, President and Chief Executive Officer, GSI Technology: has a manual bug. Fortunately, software work along made the chips sufficiently functional to put on a board for testing and the 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 based on this first silicon. We are now preparing for a second spin of Gemini 2 for mass production. Didier will provide additional details on Gemini 2 in his prepared comments.
In parallel, we have begun work on a new chip, PLATO will be designed to address the growing market for large language models in AI application, edge solution 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 expand to multiple SBIR program. We recently announced a Phase 1 contract with the U.
S. Army, securing 250,000. In this phase, we will explore and identify best fit applications to develop specialized edge computing AI solutions with Gemini 2. This will strengthen our relationship with agencies within the Department of Defense. Didier will share more details on this new win and the status of our SaaS projects.
In summary, while we are encouraged by our progress, we remain dedicated to disciplined execution across all areas. Our improved operating efficiency, growing SNS sales and strategic initiatives in commercial and government markets position us well for sustainable growth, as we continue to invest strategic alternatives. With that, I'll hand it over to Didier to provide more details on our APU business opportunities, then cover the Q3 sales breakdown.
Didier Lasserre, Vice President of Sales, GSI Technology: Thank you, Lyleen. As Lyleen mentioned, Gemini 2 is on track for a February tape out and availability in May and will 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 complete algorithm development and library building for delivery by Q3 of calendar 2025.
Leveraging Gemini 2's architecture, we can accelerate the development of our next generation chip, PLAY DOH with a cost effective faceted market strategy. PLATO's ultra low power design will target rapidly growing markets for 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 PLAYDO 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 Eileen mentioned, we are in discussions with potential customers who could be initial users 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.
As a reminder, YOLO, 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 second 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 and 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 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 evaluating 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 SAAR.
Now I'll move to the customer and product breakdowns for the Q3. In the Q3 of fiscal 2025, sales to Nokia (HE: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 3rd quarter shipments compared to 28.2% of shipments in the comparable period a year ago and 40.2% of shipments in the prior quarter. SigmaQuad sales were 39.1 percent of 3rd quarter shipments compared to 46.9 percent in the Q3 of fiscal 202438.6 percent in the prior quarter. Now I'd like to hand the call over
Liliin Xu, Chairman, President and Chief Executive Officer, GSI Technology: to Doug. Go ahead, Doug.
Douglas Shirley, Chief Financial Officer, GSI Technology: 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 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 (EPA:TTEF) 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
Didier Lasserre, Vice President of Sales, GSI Technology: in
Douglas Shirley, Chief Financial Officer, GSI Technology: 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 December 31, 2024 compared to $2,700,000 in the prior year quarter and $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 and attached provision of $44,000 compared to $155,000 in interest and other income and a tax provision of $71,000 for the same period a year ago.
In the preceding second quarter, 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 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 third quarter pre tax 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, the company had $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 was 2024 was $29,900,000 compared to $36,000,000 as of the fiscal year ended March 31, 2024.
Previously, we announced that the company had initiated a comprehensive strategic review and established a special committee of the Board to evaluate various strategic alternatives. We 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.
Conference Operator: 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.
Robert Christian, Private Investor: 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?
Didier Lasserre, Vice President of Sales, GSI Technology: Yes. 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 Gemini 2 will be the YOLO model specifically YOLO 3. We will also be following that up with the YOLO 5, but we will be publishing benchmarks when that's done, correct.
Robert Christian, Private Investor: Okay. And the second question I have 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?
Douglas Shirley, Chief Financial Officer, GSI Technology: 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.
Robert Christian, Private Investor: Well, I was almost positive that's what was stated in May. I could be wrong, but anyway, thank you very much.
Didier Lasserre, Vice President of Sales, GSI Technology: Thanks, Christian.
Conference Operator: Thank you.
Liliin Xu, Chairman, President and Chief Executive Officer, GSI Technology: And it looks like
Conference Operator: there are no further questions. Therefore, I will turn the call back over to Lillian Xu for closing remarks.
Liliin Xu, Chairman, President and Chief Executive Officer, GSI Technology: 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 results. Thank you.
Conference Operator: Thank you. Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
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