GSI Technology, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the GSI Technologies first 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 this time, we will provide instructions for those interested in entering the queue for 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 involves risks and uncertainties that would 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 have also been asked to advise you that this conference call is being recorded today July 25th, 2024, at the request of GSI Technology. Hosting the call today is Leland Hsu, the company's chairman, president, and chief executive officer. With him are Douglas Shirley, chief financial officer, and Didier Lassaire, vice president of sales. I would now like to turn the call over to Mr. Hsu. Please go ahead, sir.

Good day, everyone, and welcome to our first quarter FY 2025 earnings call. Let's start with the Q1 results. Our first quarter revenue of $4.7 million was within our guidance range despite lower SIGMA cross sales and lower sales to our military prime contractors. Additionally, the mix of products we sold affected our growth margin, causing growth margin to come in at a low range, low end of our guidance range. Right now, our team is focused on generating new revenue from our Gemini APU to address the affected decline in our legacy SM business. Our main goal this year is to launch new business line with Gemini One and secure more SBIR contract with Gemini Two. This will help us reverse the revenue decline, achieve financial stability, and ultimately return to growth when we bring Gemini 2 online. Let me explain how we are working toward this goal. We are preparing to launch our new GXL platform for fast vector search built on Gemini 1, which will be available as a cloud-based or on-premise solution. Our groundbreaking technology significantly reduces the time needed to create and update large-factor database index, increasingly using GenAI and e-commerce, providing a critical advantage for companies that rely on timely data updates. Video will provide more detail on this. Additionally, we are pending our Department of Defense Small Business Innovation Research, or SBIR. Proposal Pipeline for the Gemini APU. This contract can range from $75,000 to over $2 million. Typically pay out overnight to 18 months. So far, we are around phase one and phase two SBIR contracts. Where we are meeting our milestones and our own track to complete them in calendar 2025. Ilya will expand further on these SBIR opportunities in his comments. We are also on track to begin customer sampling Gemini 2 software in early calendar 2025. The chip has been successfully mounted onto a board, allowing our software team to work with it. Our goal is to finalize the firmware and complete the software library. by December 2024. We have uncovered minor bugs on the first silicon. The good news is that there are workarounds for all of those to continue firmware and software development without much change. Thanks to our success in working with the chip at multiple labels. We are actively thinking of strategic partners to scale resource funding, and expertise for future development. To increase our chances of successful engagement, the team is preparing to demonstrate more than 10 times improvement in 1-bit and 2-bit processing with Gemini 2. We aim to validate this concept by the December quarter with a 1-bit and 2-bit compute-in-memory demo, successfully showcasing this breakthrough will enable us to have a more productive discussion with potential strategic partners. As I stated earlier, we are diligently working to launch and monetize the Gemini 1 and 2 platforms. We are preparing to launch the GXL platform to establish a recurring revenue stream in the fast vector search market. In addition, we are actively writing Multiple SBIR proposals to build a pipeline of future revenue stream and offset the remaining development costs of Gemini 2. With these unique compute-in-memory capabilities, our compute-in-memory APU promises to deliver essential power and time-saving solutions to the rapidly expanding AI market. Now I send the call over to Didi, who will discuss our business development and sales activities. Please go ahead, Didi.

Thank you, Lilin. I want to expand on two topics that Lilin highlighted, the pending launch of GXL and the building of our SBIR pipeline. Let's start with the fast vector search and our new platform for this market called GXL. First, let me explain the problem GXL solves and why it's important. The size of vector bases is growing fast, especially with Gen AI and vector similarity search for e-commerce. Many of these databases use the HNSW algorithm to build indexes because it provides quick and accurate search results. However, building an HNSW index takes a long time, which is a problem for databases needing fast and accurate information. One way to fix this is by speeding up the calculations needed to build or refresh the index by running them in parallel. These calculations take most of the time, so making them faster is crucial. Our in-compute memory APU technology is designed for this. It enables massive parallel processing, solving the slow index building issue. The APU processes data directly in memory at the bit level with millions of bit processors working simultaneously. This means it can handle large amounts of data quickly, reducing the index build time by about 85% compared to traditional CPU-based solutions. The three main benefits of our GXL solution are scalability. It provides fast access to information for Gen AI and e-commerce recommendations, even as these applications grow to billions of vectors. Second benefit is lower, excuse me, lower operational cost. By using computational resources for less time, especially in cloud computing, where costs are billed hourly, it saves money. And the last benefit is faster updates. New products can be added or deleted into the index more quickly in e-commerce applications, leading to timely recommendations and increased revenue opportunities. We recently published a white paper and a blog on medium about efficient HNSW indexing. Be sure to check those out for more information. The GXL platform is being prepared for launch and we aim to begin connecting with the vector database companies that we have identified and then expand to larger e-commerce players. Switching to the build out of our SBIR pipeline and our focus on landing these phase one and phase two contracts. from the Department of Defense or DoD. We view this strategy as a highly efficient and effective way of increasing awareness of GSI's APU within the DoD. These SBIR awards validate our statements regarding the APU's performance and benefits with many large divisions within the DoD and can bring a significant multiplier effect for future opportunities as many of these applications will have dual use for defense and commercial. This is why we have focused resources on submitting proposals and then prioritizing the execution of these contracts. We are working on a phase one, excuse me, we are working on a phase two SBIR contract with the Air Force worth $1.1 million, which we started in 2023 and are now over 25% complete. Additionally, we have a phase two SBIR contract with the Space Development Agency valued at $1.25 million. and we are over 50% complete on this project. We recently secured a new Phase 1 SBIR with one of the largest divisions of the DoD, a division that's new to GSI APU's technology. It has a value up to $250,000. We will give more details on this latest win once the contract is signed. We are currently preparing several other SBIR proposals, adding up to a total pipeline of $6 million. Our next submission will be for a Phase 2 SAR space-level onboard contract worth $1.25 million. In addition to SBIRs, we have initiated the process of seeking additional government funding to enhance the resources we could dedicate to further developing G2. This funding would enable us to expand the Gemini 2 product line by creating a version for advanced edge AI applications. On a final note regarding APU opportunities, we sold a Gemini 1 LIDA car to a major aerospace and defense contractor who will evaluate this technology for various underclosed applications. We shipped the car in June quarter, and the PO also provides GSI software training in the September quarter. Although these sales generate minor revenue, this opportunity is valuable for prospecting engagement with this prominent contractor. We are excited to see this customer using our technology. Regarding the two-star prospects we've mentioned in previous calls, one is on hold as we finalize some documentation with that customer. The other is looking to expand the scope of our services that we can provide in different areas of their operation where they could possibly use the APU. Our team is actively investigating how to accelerate the delivery of these additional services. Now let me switch to the first quarter's customers and product breakdown. 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 the same period a year ago and $694,000 or 13.5% of revenues in the prior quarter. Military defense sales were 31.9% of first quarter shipments compared to 33.8% of shipments of the comparable period a year ago, and 35.5% of shipments in the prior quarter. Sigma Quad 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. Regarding our SRAM business outlook, while our largest customer has announced some business challenges, our current expectations for orders from them remain stable for the remainder of the calendar year. Several other SRAM customers are currently managing their inventory levels, and we anticipate they will resume placing orders before the end of the calendar year. Additionally, we believe that the customers who were previously reducing their use of SRAMs have now stabilized. Now I'd like to hand the call over to Doug. Doug, go ahead, please.