Ladies and gentlemen, thank you for standing by. Welcome to GSI Technology's Third 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. At that time, 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've been asked to advise you that this conference call is being recorded today, January 25, 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 now like to turn the conference over to Mr. Shu. Please go ahead, sir.

Good afternoon, and thank you for joining us. I am pleased to share several key updates from an eventful third quarter. Starting with product development, we achieved two major milestones that will keep us on track to advance the Gemini APU family. First, in November, we successfully completed the radiation-hardened testing on the Gemini-I APU for compute-in-space applications. The test results confirm that Gemini-I has met characteristics to be a radiation-tolerant processor. We are actively engaged with several satellite companies that need radiation-tolerant APUs, and we are encouraged by the strong interest. Moving to our next-generation APU, we completed the table of Gemini-II in the third quarter. In late February, we will evaluate the initial spin and expect to begin sampling the Gemini-II chip in the second half of calendar 2024. Gemini-II has 8 times the internal memory and 10 times better performance than Gemini-I, and notably lower cost. This dramatic improvement in cost performance allows us to target a much broader range of applications. The 96-megabyte of internal memory in Gemini-II can fit many AI models entirely on the chip, enabling in-place data processing without accessing external memory or external DRAM. This should give Gemini-II a tremendous advantage in compact edge applications like drones and ADAS. We anticipate starting initial alpha deployment with select customers in the second half of calendar 2024. Lastly, in the third quarter, we shipped radiation-hardened SRAMs to two customers for two new programs, and we received a second SBIR Direct-to-Phase II contract in the amount of $1.1 million. Looking ahead, we are in the early stage of developing the architecture for our next-generation Gemini-III chip. We had discussions with several hyperscalers about APU design options to best address the emerging market's need in the data center. In addition to helping hyperscalers lower data center power consumption, the APU can also provide significant benefits to GenAI end users by reducing inference costs. We initiated preliminary discussions with two major hyperscalers who have expressed interest in our technology and continue to work with internal teams on various early-stage concepts. Turning to our financial performance, the third quarter revenue of $5.3 million met our guidance, with a gross margin of 56% at the midpoint of our guidance. The sequential improvement in gross margin reflects product mix this quarter. Our operating expenses, which increased both year-over-year and sequentially, included a one-time expense of $2.4 million for the pre-production mask for Gemini-II. We view this as an investment in future growth as Gemini-II will greatly expand our APU market reach. In parallel, we continue discussions with potential strategic partners to support the Gemini-II launch and assist with Gemini-III development. As our most ambitious chip to date, we anticipate that Gemini-III will require significant capital investment and partnership to help mitigate our funding needs. We remain focused on financial management to fuel our product roadmap and expansion into new markets. Recently, Cornell University published a research paper spotlighting the unique efficiency of our Gemini-I APU in accelerating location filtering in DNA mapping. Didier will discuss the details of the paper and its implications for GSI in his comments. In closing, it was an eventful third quarter with tremendous progress on our Gemini roadmap, prudent expense management, and actions to increase our financial flexibility to support our growth. We remain laser-focused on bringing our innovative APUs to market and driving long-term value creation. Now, I will hand the call over to Didier, who will discuss our business performance further. Please go ahead, Didier.

Thank you, Lee-Lean. I want to provide some additional context on why we are so confident in the market potential for our APU architecture, especially for inference workloads. First, the unmatched flexibility of our variable bit processing is key. With 2 million undefined bit processors that can be toggled from 1 bit to 2 million bits cycle by cycle, our APU can adapt in real-time to maximize efficiency. This dynamic bit-wise configurability can process long strips 1 bit at a time and is ideal for inference since research shows that different bit precisions are more efficient for different models. Second, our APU architecture breaks the Von Neumann model by removing the data fetch function. This innovative design delivers higher performance with lower power consumption. As Lee-Lean mentioned, these capabilities directly address the critical needs of data centers and emerging applications by lowering data center power consumption and reducing inference costs for GenAI end users. Importantly, I want to emphasize that our APU represents true compute-in-memory architecture. Unlike competing chips that claim compute-in-memory, they are actually near memory compute, and our APU has logic physically integrated into the memory. This fundamental difference in architecture will ultimately enable our APU to achieve the transformative speed and efficiency gains we anticipate as we scale. Our true compute-in-memory architecture gives us a sustained competitive advantage. To accelerate ecosystem development, we are focusing on getting the APU into the hands of key partners in the military, hyperscalers, and academia. The real-world deployment and libraries will showcase the benefits, expand use cases, and support our go-to-market capabilities. One example of the strategy helping us promote and monetize Gemini-I is a recently published research paper from Cornell University. We are pleased to announce that the Cornell paper demonstrates our Gemini-I APU's unique performance benefits for genomic applications. Leveraging the APU's massively parallel in-memory architecture, Cornell researchers showed up to 6 times faster DNA sequencing filtering compared to a 16-core CPU. This showcases our technology's advantage for data-intensive workloads requiring rapid, low-precision comparisons. The study also revealed strong potential to accelerate other applications with similar data-matching needs, including medical data analysis, search, security, and more. With simple scaling, our APU can be packed into cost-effective high-density servers to multiply this performance for real-world deployments that can lower power budgets for hyperscalers compared to GPU solutions. These results reinforce our significant market opportunities across sectors that rely on efficiently finding patterns and similarities within massive data sets. We remain focused on delivering the game-changing in-memory compute performance to customers across multiple industries. As Lee-Lean mentioned, we anticipate receiving the first silicon devices of Gemini-II in February. After initial evaluation and debugging, we will target a second spin this summer and initiate benchmarking shortly after. Our $2.3 million in SBIR funding will support this development. As a reminder, this includes our recently announced second SBIR Direct-to-Phase II $1.1 million contract to create specialized algorithms for the U.S. Air Force Research Laboratory. The target applications include in-craft applications such as search and rescue, object detection, moving target indication, change detection, and SSIM in GPS-absent situations. GSI will also develop algorithms using data from the U.S. Space Force to showcase the performance benefits of its compute-in-memory APU integrated circuit. In summary, the versatility of our architecture, hands-on customer engagements, and ecosystem partnerships gives us confidence in our market opportunity. We have a robust product roadmap to deliver continuous innovations that we believe will capitalize APU adoption across multiple industries in the coming years. Let me switch now to customer and product breakdown for the third quarter. In the third quarter of fiscal 2024, sales to Nokia were $807,000 or 15.2% of net revenues compared to $1.3 million or 20% of net revenues in the same period a year ago, and $1.2 million or 20.3% of revenues in the prior quarter. Military/defense sales were 28.2% of third quarter shipments compared to 26.2% of shipments in the comparable period a year ago and 34.8% of shipments in the prior quarter. SigmaQuad sales were 46.9% of third quarter shipments compared to 45.2% in the third quarter of fiscal 2023 and 55.8% in the prior quarter. On one last note on product sales in the third quarter, we shipped over $600,000 of prototype radiation-hardened SRAM to two different customers. These will be deployed in two separate satellite programs. I'd like to hand the call over to Doug. Doug, go ahead, please.

Thank you, Didier. We reported 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, compared to net losses of $4.8 million, or $0.20 per diluted share, on net revenues of $6.4 million for the third quarter of fiscal 2023 and a net loss of $4.1 million, or $0.16 per diluted share, on net revenues of $5.7 million in the second quarter of fiscal 2024. Gross margin was 55.9% compared to 57.5% in the prior-year period and 54.7% in the preceding second quarter. The changes in gross margin were primarily due to changes in product mix and volume sold in the three periods. Total operating expenses in the third quarter of fiscal 2024 were $9.7 million compared to $8.5 million in the third quarter of fiscal 2023 and $7.2 million in the prior quarter. Research and development expenses were $7 million compared to $5.5 million in the prior-year period and $4.7 million in the prior quarter. Selling, general and administrative expenses were $2.7 million in the quarter ended December 31, 2023, compared to $3 million in the prior-year quarter and $2.5 million in the previous quarter. Third quarter fiscal 2024 operating loss was $6.7 million compared to $4.8 million in the prior-year period and an operating loss of $4.1 million in the prior quarter. The third quarter fiscal 2024 net loss included net interest and other income of $155,000 and a tax provision of $71,000, compared to net interest and other income of $61,000 and a tax provision of $84,000 for the same period a year ago. In the preceding second quarter, net loss included net interest and other income of $71,000 and a tax provision of $33,000. Total third quarter pre-tax stock-based compensation expense was $649,000 compared to $655,000 in the comparable quarter a year ago and $676,000 in the prior quarter. At December 31, 2023, we had $21.6 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 $23.1 million as of December 31, 2023, versus $34.7 million at March 31, 2023, with no debt. Stockholders' equity as of December 31 was $39.6 million compared to $51.4 million as of the fiscal year ended March 31, 2023. For the fourth quarter of fiscal 2024, we anticipate net revenues in a range of $4.8 million to $5.4 million, with a gross margin of approximately 55% to 57%. Operator, at this point, we'd like to open the call to Q&A.

Thank you. We will now begin the question-and-answer session. Our first question is from Brett Reiss with Janney Montgomery Scott. Please go ahead with your question.

Hi, gentlemen. You can talk to me like I'm six years old. Could you just explain what is an infrequent $2.4 million charge for a pre-production mask? I'm not an engineer. Just if you can give me some more clarity on that?

Every time we introduce a new product, we need to have a mask set ready for wafer manufacturing. Generally, when we incur costs for these mask sets related to production products, we capitalize those costs into prepaids and spread them out over 12 months. The only exception to this is when we prepare a mask set for a new process technology that we've not utilized before; in that case, we record the expense as R&D. In the last quarter, we completed the design phase for Gemini-II using a 16-nanometer process at TSMC, which we've never used before, so we recorded the $2.4 million expense as R&D.

All right. So, this is one shot. It's not going to be recurring?

No. It will recur in the future when we have another product that tapes out on a process technology that we've never used before. So, it's infrequent. It doesn't happen every year. It's at most every two or three years.

Okay. The cash, which was my margin of safety in my investment here, keeps dwindling down. I'm a little concerned about that. Some of these initiatives with bringing in other joint venture partners, what's the timetable on that? And how long do we have before we burn through the remaining cash?

Well, we're currently looking at various opportunities, and Didier mentioned talking to hyperscalers and others. To come out with our next product, it's going to require significant investments, so we're looking for partners or other sources of funding. In addition to that, we have a building that we own that's worth quite a bit of money, and we'll be looking into potentially selling that building in the near future.

Right. What is the building appraised at? And in a base case scenario, what do you think you could sell it for?

We think we can probably get somewhere in the range of $10 million to $13 million.

Right.

And there's no debt tied to that. It's fully paid for.

Right. Could you just give me a broad outline of what the structure of a joint venture partner's capital investment in GSIT would take? Would they pay an upfront milestone payment with other payments to follow? Would it be an equity investment? What do you think the structure of that would look like?

So, it could be either of those. What I mean is when Lee-Lean was talking about a partner for funding the next program, that's specifically for Gemini-III. So, Gemini-II was fully funded internally. But for Gemini-III, we are looking for a partner for that, most likely a customer funding partner. But aside from that, that would be more of an NRE type of funding, so there would be milestones associated with that. But aside from that, we are also open to equity investments in the company as well.

Okay. I'll drop back in queue. Thanks for taking my questions.

Thank you.

Thanks, Brett.

Our next question is from Jeff Bernstein with Silverberg Bernstein Capital. Please go ahead with your question.

Good afternoon. I have a question regarding the recent placement of those rad-hard SRAM parts for evaluation. If you secure those programs, what kind of revenue can you expect and over what timeframe might you benefit from those two satellite programs?

Sure. One of the programs involved a prototype quantity for demonstration purposes, with one costing just over $500,000 and the other around $150,000, totaling 41 parts shipped. You can calculate the average selling prices based on those figures. These are just prototype quantities, and while we don't have the exact quantities yet, they are programs set to launch within the next year. It's likely that production won't be released until the second half of 2025 at the earliest. If the prototype costs $500,000, you can expect that production costs could be significantly higher.

And so, these would be like GEO satellites. So, these aren't satellite networks. These are going to be individual larger satellites?

These ones are X, one is GEO, one is actually LEO.

Okay. And will you get an automatic ride into space on one of these and actually get sort of provenance from that, or are we still looking to get that somewhere else?

No. Certainly, as we've mentioned before, we have shipped out other prototype devices over the last couple of years. It could be any of the programs we previously discussed or these two. One of these appears to be advancing at a fairly quick pace. Therefore, there is a possibility that one of the prototypes we shipped last quarter could become operational relatively soon.

Okay. And then, just on Nokia's lowest revenue from them in forever, what's the story on Nokia and the outlook for that router that you sell into?

They are contract manufacturers because we send parts to two different contract manufacturers. Both had some inventory, so they were using up that inventory. We have mentioned before that we receive a 12-month rolling forecast from Nokia, and those forecasts are still reflecting the run rate we've observed over the last few quarters. This is just slightly above what we achieved in the last quarter, in the range of $1 million to $1.1 million per quarter.

Okay. And at Needham, I think you also mentioned in addition to looking for a partner, potentially a financial partner, potentially a development partner, possibly a hybrid of both of those for Gemini-III. I think you also mentioned something about potentially licensing IP. It sounds like for what would probably be an edge kind of case for semiconductor IP for doing in-memory processing. Can you just talk about that? Would that be sort of an upfront license and then royalty stream, or just give some color around that?

We are primarily focused on Gemini-III. It could involve intellectual property or product development for the customer. Overall, as mentioned in the conference call, we made significant progress over the quarter, and we're still working on it.

Thank you. There are no further questions at this time. I'd like to hand the call back to Lee-Lean Shu for any closing comments.

Thank you all for joining us. We look forward to speaking with you again when we report our fourth quarter and the full year fiscal 2024 results.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.