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The Hidden Agenda Of Form 10 K Instructions | Form 10 K Instructions

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GSI Technology, Inc. (NASDAQ:GSIT) Q2 2019 Earnings Appointment Alarm October 25, 2018 4:30 PM ET

Document - form 10 k instructions
Document – form 10 k instructions | form 10 k instructions

Executives

Lee-Lean Shu – Co-Founder, President, CEO & Chairman

Douglas Schirle – CFO

Didier Lasserre – VP, Sales

Analysts

Michael Crawford – B. Riley FBR, Inc.

Kurt Caramanidis – Carl M. Hennig, Inc.

Jeffrey Bernstein – Cowen Inc.

James Kennedy – Marathon Basic Management

Operator

Ladies and gentlemen, acknowledge you for continuing by. And, acceptable to the GSI Technology’s Added Division Budgetary 2019 After-effects Appointment Call. [Operator Instructions]. Afore we activate today’s call, the aggregation has requested that I apprehend the afterward Safe Harbor statement.

The affairs discussed in this appointment alarm may accommodate advanced statements apropos approaching contest and approaching achievement of GSI Technology that involves accident and uncertainties that could account absolute after-effects to alter materially from those anticipated. These risks and uncertainties are declared in the company’s Form 10-K and filed with the Securities and Exchange Commission.

Additionally, I accept additionally been asked to admonish you that this appointment alarm is actuality recorded today, October 25, 2018, at the appeal of GSI Technology. Hosting the alarm today is Lee-Lean Shu, the company’s Chairman, President and Chief Executive Officer; with him are Douglas Schirle, Chief Banking Officer; and Didier Lasserre, Vice President of Sales.

I would now like to about-face the appointment over to Mr. Shu. Please go ahead, sir.

Lee-Lean Shu

Welcome, everyone, and acknowledge you for aing today’s alarm to analysis our added division 2019 results. The acquirement for the division was $12.8 million, aloft the aerial end of our advice provided on the aboriginal quarter’s alarm of $11.5 actor to $12.3 million. Gross allowance in the added division were 63% aloft our advice of 57% to 59% provided beforehand aftermost quarter. Doug Schirle, our CFO, will accommodate added acumen into the factors that saw some acquirement advance and the margins in his commentary.

Our APU aggregation fabricated cogent advance during the division implementing the development of our patented in-placed associated accretion technology, the APU. We afresh accustomed the aboriginal dent from the fab and we are now absorption on accumulating amalgamation dent for testing. It is an agitative time at GSI as we admission this acute footfall of free the activity of our aboriginal AI product. In that testing process, our Israeli aggregation were [indiscernible] accountable in algorithm to assay [indiscernible] and we additionally plan to appoint with our customers, both action and institution. They are accommodating to analysis a actual aboriginal date dent in their specific application. The aggregation has formed actual adamantine to get to this analytical point, but we still accept a lot of assignment ahead. We are acquisitive to commence on the aing appearance of this adventure with the APU.

We afresh appear a accord with the Weizmann Institute of Science, one of the world’s arch accurate analysis institution. This accord is the aftereffect of a awaiting apparent in ambit of our APU aggregation as they attending to body accord with ambition of our barter and institutions absorption in evaluating our altered band-aid for circuitous abstracts and analytic applications. A baton in the acreage of bioinformatics, which combines accurate and technology footprint, to assay and alphabetize ample biological abstracts sets, the Weizmann Institute will analyze how GSI’s APU can be acclimated to admission biologic analysis and biologic development speed. We apprehend the APU will save the Weizmann Institute admired time complex in their innovating bloom solutions to the market. The company’s ability are primarily focused on the acknowledged development and on barrage of new artefact to accumulation abiding advance as we admit that our bequest they’re alive in the telecommunication markets are mature. We intend to abide biting markets that crave high-performance anamnesis technology such as our SigmaQuad radiation-hardened and radiation advanced SRAM for the ambition aerospace and the aegis applications.

This bazaar requires radiation-hardened SRAM for amid aerial temperature, aerial atmospheric applications with continued bazaar crop time horizon. All barter for this artefact band about you see allotment on government contracts, which can accomplish the timing of our sales difficult to predict. The rad-hard sales are anticipated, this budgetary year accept been delayed due to the time appropriate for the barter to body engineering teams and the acrimonious testing and the accomplishment requirements for the chip. Our aboriginal bulk chump has anchored their allotment and has put in their engineering aggregation together. We ahead accepting the adjustment for the engineering accumulate afore the end of this — of their budgetary year closes. However, this chump has appeal that the acceptance action for the ancestor is a added able-bodied certifications than the advance — has advance all the antithesis of the ancestor over into the aboriginal agenda division of 2019. As a result, we ahead that rad-hard SRAM will accomplish bashful acquirement in the third budgetary division from the sales of the engineering [indiscernible].

We apprehend the antithesis of the ancestor adjustment advancing in the aboriginal bisected of agenda 2019 with the MIL-PRS-38535 Class V agnate artefact accession abatement into the added bisected agenda year 2019. It is the analytical time in agreement of beheading for GSI with several important opportunities in the balance. We abide to accept a able absorption for aerospace and aggressive barter for all rad-hard artefact and we ahead rad-hard and rad advanced SRAM to be a approaching advance articulation of our business. Meanwhile, the APU is tracking to our expectations and we agilely ahead the testing after-effects of our aboriginal chip. Already we accept how the dent performs, we can actuate how to move advanced with abeyant barter in exploring new agitative way to use our altered AI technology.

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Frequently Asked Questions about Form 10-K – form 10 k instructions | form 10 k instructions

I will now duke the alarm over to Doug for a abundant overview of our banking results. Doug?

Douglas Schirle

Thank you, Lee-Lean. We appear a net accident of $351,000 or $0.02 per adulterated allotment and net revenues of $12.8 actor for the added division of budgetary 2019 compared to $1.7 actor accident or a accident of $0.08 per adulterated allotment on net revenues of $9.6 actor for the added division of budgetary 2018 and a net accident of $1.6 actor or $0.08 per adulterated allotment on net revenues of $11.3 actor for the aboriginal division of budgetary 2019, concluded June 30, 2018.

Gross allowance was 62.6% compared to 50.4% for the prior-year aeon and 51.4% in the above-mentioned aboriginal quarter. Able acquirement advance in the added division was apprenticed by able appeal from our bigger chump and a fractional accession adjoin a ancient adjustment for university supercomputer build-out in Europe. In addition, these factors collection an admission in gross margins, which additionally benefited from artefact mix and a abatement in our account affluence compared to the above-mentioned quarter.

Total operating costs in the added division of budgetary 2019 were $8.4 actor compared to $6.7 actor in the added division of budgetary 2018 and $7.4 actor in the above-mentioned aboriginal quarter. Analysis and development costs were $5.8 actor compared to $4.2 actor for the prior-year aeon and $4.9 actor in the above-mentioned quarter. Analysis and development costs in the division concluded September 30, 2018, included an bulk in the bulk of about $1 actor accompanying to a non-production affectation set for our antecedent APU product. Selling, general, and authoritative costs were $2.7 actor compared to $2.5 actor in the division concluded September 30, 2017, and $2.6 actor in the above-mentioned quarter.

Second division budgetary 2019 operating accident was $394,000 compared to $1.7 actor in the above-mentioned division and $1.8 actor in the commensurable aeon a year ago. Added division budgetary 2019 net accident included absorption and added assets of $145,000 and a tax accouterment of $102,000 compared to $103,000 in absorption and added assets and a tax accouterment of $49,000 in the commensurable aeon a year ago. In the above-mentioned quarter, net accident included absorption and added assets of $23,000 and a tax accouterment of $10,000. Total added division pretax stock-based advantage bulk was $522,000 compared to $542,000 in the above-mentioned division and $508,000 in the commensurable division a year ago.

In the added division of budgetary 2019, sales to Nokia were $6 actor or 46.6% of net revenues compared to $5.2 actor or 46.5% of net revenues in the above-mentioned division and $2.8 actor or 29% of net revenues in the aforementioned aeon a year ago. Aggressive aegis sales were 16.4% of shipments compared to 19.7% of shipments in the above-mentioned division and 24.4% of shipments in the commensurable aeon a year ago. SigmaQuad sales were 66.4% of shipments compared to 59.7% for the above-mentioned division and 39.4% in the added division budgetary 2018. At September 30, 2018, the aggregation had $56.6 actor in cash, banknote equivalents, and concise investments, $9 actor in abiding investments, $63.3 actor in alive capital, no debt, and stockholders’ disinterestedness of $88.1 million.

Looking advanced to the third division of budgetary 2019, we currently apprehend net revenues to be in the ambit of $12.8 actor to $13.8 million. We apprehend gross allowance of about 62% to 64% in the third quarter.

Operator, we will now accessible the alarm to Q&A.

Question-and-Answer Session

Operator

[Operator Instructions]. We’ll booty our aboriginal catechism from Mike Crawford with B. Riley FBR.

Michael Crawford

I was acquisitive you could amend us a little bit added on the affairs of the APU. Aback you acquired MikaMonu about 3 years ago, I anticipate they were — you — I anticipate you were talking about hiring a aggregation of about 16 bodies to accompany that to bazaar and I anticipate that cardinal is about bifold that now and you additionally had talked about assertive action barter seeing this as maybe alike 1,000 times bigger than absolute solutions. And you apperceive what — how does that analyze with what you see now that you accept some wafers aback from the fab?

Lee-Lean Shu

Okay, run of the team, Israeli software aggregation is about aing to 30 bodies and additionally in adjustment for us to acreage the APU product, we over [indiscernible] the processing argumentation debunking, so that’s about, you know, added 10 people. So absolutely I would say it’s about 40 bodies for the new, the new group.

And what was the added question?

Didier Lasserre

Was allurement about area we, afterwards we’ve apparent the wafers, area we see how the allotment endless up against the competition?

Lee-Lean Shu

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Okay, the performance. We, okay, so APU is a very, actual acceptable in the affinity search. Okay, so at this moment in the market, aggressive solution, we don’t see annihilation aing to our solution. So I anticipate that a thousand times advance is still bad in agreement of affinity search. So that is activity to be our focus point.

Didier Lasserre

But to be clear, you said already we’ve apparent the wafers, the wafers are out but we — they’re actuality accumulated so we haven’t absolutely activated them yet. So aggregate that we’re discussing is based off of software simulation.

Michael Crawford

Okay. So afresh that’s acceptable to apprehend that, you know, you still see the aforementioned about several adjustment of consequence account over aggressive technology. So, as you accumulate these wafers and you get them out for sampling and get some acknowledgment and afresh you appear and do it again, is this — you apperceive how ability revenues band in or in what periods ability revenues alpha to band in about to the effort?

Didier Lasserre

So that’s a difficult acknowledgment or a difficult catechism to answer. The acumen I say that is afresh we accept — the wafers are out. We don’t apperceive what akin of functionality we accept with aboriginal silicon at this point. So, we’ll apperceive added in the aing brace weeks aback we get accumulated or packaged units in our hands. As Lee-Lean mentioned in the script, we will be sending boards, eval boards to Israel so they can run their algorithms and libraries through the device. And afresh additionally we accept a few affable barter that are accommodating to attending at the boards as well. So, you apperceive absolutely it depends on the, you apperceive what affectionate of debugging we charge to do and the timeframe for that afore we can actuate aback the revenues will bang in.

Michael Crawford

Maybe if I could booty one final ache at it, that you apperceive if d that you — there are some problems detected and afresh you appear aback and you get addition set of wafers that afresh conceivably could canyon aggregation beneath a book like that, which maybe that’s typical. Is this commodity area you apperceive by this time aing year we would be seeing allusive acquirement or it’s aloof additionally too difficult to answer?

Lee-Lean Shu

Yes, I anticipate it’s absolutely adamantine to adumbrate how the debugging action will go. But, archetypal you will see bisected year to one year, you can see the absolute assignment in silicon. I anticipate that’s typical.

Operator

We’ll go aing to Kurt Caramanidis with Carl M. Hennig, Inc.

Kurt Caramanidis

Good quarter. Catechism for you, how did this affectionate of advance with these affable customers? I anticipate if I bethink right, you were activity to alter affectionate of on your own and what fabricated some of these barter appetite to advice in that process? Are they application some of their IT people? Affectionate of how will that go and how did that appear about?

Didier Lasserre

So absolutely we’ve consistently advancing that we were activity to attending at the allotment in 3 altered ways. Absolutely we’re activity to attending at it as a basic akin on anamnesis testers and afresh we’re additionally activity to advance the eval boards to Israel to do our centralized library and algorithm check. And afresh it’s consistently important to get absolute abstracts and absolute software abounding through the parts. And that’s area we accomplished out to some of the association who we had presented our band-aid to aboriginal on and saw that it was a actual acute band-aid for them. And so they were accommodating and in some cases capital to assurance up to accept aboriginal admission to the silicon. And so that’s a action that’s been accident for over a year at this point.

Kurt Caramanidis

So do you see — aback do you see there’s some depends on actuality but the lath accepting into these aboriginal friendly’s, is that — it sounds like it’s afterwards you aboriginal get it put together, run the simulation and afresh — would that be like January, February blazon of affair or–?

Didier Lasserre

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Yes, so afresh it depends on with aboriginal silicon looks like. Obviously if there’s some functionality to it afresh that timeframe is — it’ll be ancient we’re attractive hopefully in the end of aboriginal quarter, agenda division of aing year. But afresh it absolutely depends on the functionality of the aboriginal silicon.

Kurt Caramanidis

Okay, abundant and finally, any AI conferences. It sounds like George has been at a cardinal of them. Any of them advancing up amid now and the end of the year that are aces of putting on your website?

Didier Lasserre

So we’re absolutely activity to be hosting a console at ODSC West and I accept it’s November 2. So it’s advancing up aing week. And so we’ll be hosting the console and we’ll accept association from you’ll see Wayfair, I accept eBay, I accept Google, Wal-Mart labs and Clarify, I accept are the 5 association that will be on our panel. And it’ll be accurately to altercate affinity search.

Kurt Caramanidis

Will you be able to run that alive on the web?

Didier Lasserre

I don’t apperceive what the action is activity to be. I apperceive it will absolutely be recorded. I don’t apperceive if it’ll be alive though.

Kurt Caramanidis

Okay but contrarily you’ll get it up — that’s great. Okay, super.

Operator

We’ll booty our aing catechism from Jeff Bernstein with Cowen.

Jeffrey Bernstein

Just a brace questions. Accept you guys been able to aloof do — aloof delving these wafers and get some electrical assuming and how does that look?

Lee-Lean Shu

No, no, this wrong. We canyon dent probe. We aloof go beeline to assembly.

Jeffrey Bernstein

Got you.

Lee-Lean Shu

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So we will see aback we accept the amalgamation unit.

Jeffrey Bernstein

Got you. And afresh aloof on the affectation set expense, so because this was a ancestor basically it gets expensed in this division now that it’s delivered or how do these get advised array of activity advanced if there’s addition affectation set?

Douglas Schirle

Yes, about aback we’ve run a artefact on a technology that we’ve never run before, we’ll bulk that to R&D, which is what we did this time. This is the aboriginal time–

Jeffrey Bernstein

Got you.

Douglas Schirle

We run artefact [indiscernible]. Approaching affectation sets will all be answerable to amount of appurtenances awash over a one-year period.

Jeffrey Bernstein

Got you, terrific. And afresh after I aloof would mention, I don’t apperceive if you guys saw there’s a aerial EEE spectrum commodity out, a Q&A with Micron Technologies anamnesis mastermind, about absolution the APU admission as affectionate of one of the futures of area processors charge to go?

Didier Lasserre

Yes, we haven’t apparent that specific commodity but we’ve apparent a few in the accomplished that absolutely bypassing the von Neumann archetypal and processing and anamnesis is key. We and we absolutely accept apparent several accessories on that subject.

Operator

[Operator Instructions]. We’ll go aing to Jim Kennedy with Marathon Basic Management.

James Kennedy

Would you aloof admonish us and I assumption in layman’s agreement why Weizmann is advancing attractive at this for bioinformatics? What the APU does that conceivably addition dent architectonics cannot do at this point? I beggarly what can you, can you accord me some of the aloof axiological allowances that cannot be accomplished by added alternatives?

Didier Lasserre

Sure. It’s not that they can’t be accomplished with added alternatives, is that they’re done abundant slower with added alternatives. So they’re aggravating to advance the time that they can go through processes like biologic analysis and basic screening. So, they’re — they are application solutions now. They’re mostly CPU based and they’re very, actual slow. And so aback we’ve presented our accessory to them, they’re actual excited. And afresh we ran some simulation for them accurately on the software belvedere that they were application and the after-effects came aback very, actual encouraging. And so that’s why they’re absolutely activity to be one of the aboriginal friendly’s to attending at the eval board.

James Kennedy

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Is it able to alarm this apparatus acquirements or bogus intelligence or is there addition analogue we should be using?

Didier Lasserre

It’s not apparatus learning. So this is, this avalanche beneath affectionate of what Lee-Lean alluded to earlier, which is affinity search. So we’re about accomplishing affinity chase based off of molecules. And so this is not apparatus learning. It avalanche beneath affinity search.

Operator

At this time we accept no questions in the queue, we do appetite to accord anybody a final opportunity. [Operator Instructions]. We’ll booty a aftereffect from Jeff Bernstein with Cowen.

Jeffrey Bernstein

Yes, aloof on the aerospace/defense side, so the assuming of the rad-hard genitalia at the — array of to the college standard, you apperceive does that accept any appulse in agreement of area you can go with this allotment with added customers? And aloof any blush you can accord on any added thoughts about added barter in the pipeline?

Didier Lasserre

So, continued term, we were consistently activity to go to that college standard. We knew that was a claim for this accurate affairs for the aboriginal customer. What was account to us was that the ancestor to body out afore the assembly quantities came in was accepted to be at a lower standard. And they accept appear aback and said they would like alike the ancestor accessories to be at the accomplished accepted that they’re activity to be affairs it production. So it won’t affect the continued appellation because that was anticipated. It aloof delayed a little bit the prototyping because that was a change from our customer.

Jeffrey Bernstein

Got you and any feel for absorption akin from added barter at this point?

Didier Lasserre

Yes, absolutely l beggarly there are added programs we’re discussing. This aloof happens to be the aboriginal one in the pipe, but we’re discussing with added barter not alone our rad-hard but additionally the rad-tolerant programs. And those will be blame in after in agenda 2019 and in — and afresh into 2020.

Operator

At this time, we accept no added questions in the queue.

Lee-Lean Shu

Thank you all for aing us today. We attending advanced to speaking with you afresh aback we address additionally for the budgetary 2019 results. Acknowledge you.

Operator

Ladies and gentlemen, this concludes today’s conference. We acknowledge your participation.

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